STOCK PURCHASE AGREEMENT
for
100 PERCENT OF THE COMMON STOCK
of
L.R.S., INC.
(a California Corporation)
dba Amerimac Cal West Financial
First Intercity Mortgage
Bay Cities Relocation
By and Between
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (SELLERS)
and
Transnational Financial Network, Inc. (BUYER)
(A California Corporation)
Dated as of July 30, 1999
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................1
Section 1.01 Definitions..............................................1
ARTICLE II. PURCHASE AND SALE OF STOCK......................................1
Section 2.01 Purchase and Sale of Stock...............................1
Section 2.02 Sale of Shares...........................................1
ARTICLE III. CONDITIONS TO CLOSING AND CLOSING.............................2
Section 3.01 Conditions Precedent to the Obligations of Buyer.........2
(a) The ▇▇▇▇▇▇▇ Employment Agreement................................2
(b) The ▇▇▇▇▇▇▇▇ Employment Agreement...............................2
(c) Delivery of Stock Certificates..................................2
(d) Completion of Exhibits and Schedules............................2
(e) Delivery of Opinion Letter......................................2
(f) Delivery of Consents and Approvals..............................2
(g) Correctness of Representations and Warranties,
Compliance with Agreement.....................................2
(h) Absence of Legal Restraints.....................................3
(i) Absence of Bankruptcy Proceedings...............................3
(j) Absence of Adverse Effect.......................................3
(k) Termination of Options to Purchase Shares.......................3
(l) Release of Pledged Shares and Full Release from ▇▇▇▇ ▇▇▇........4
(m) Payment of Shareholder Obligations to the Company...............4
(n) Delivery of Investment Letters..................................4
(o) Receipt of other documents......................................4
Section 3.02 Conditions Precedent to the Obligations
of the Shareholders.....................................4
(a) The ▇▇▇▇▇▇▇ Employment Agreement................................4
(b) The ▇▇▇▇▇▇▇▇ Employment Agreement...............................4
(c) Payment of the Purchase Price...................................4
(d) Completion of Exhibits and Schedules............................4
(e) Correctness of Representations and Warranties,
Compliance with Agreement.....................................4
(f) Receipt of other documents......................................5
(g) Delivery of Consents and Approvals..............................5
(h) Supplemental Information........................................5
(i) Release of Pledged Shares and Full Release from ▇▇▇▇ ▇▇▇........5
Section 3.03 Closing..................................................5
ARTICLE IV. PURCHASE PRICE AND PURCHASE PRICE ADJUSTMENTS....................5
Section 4.01 Purchase Price...........................................5
Section 4.02 Payment of the Purchase Price............................6
(a) Purchase Price paid for ▇▇▇▇▇▇▇ Shares..........................6
(b) Purchase Price paid for ▇▇▇▇▇▇▇▇ Shares.........................6
Section 4.03 Preliminary Closing Balance Sheet........................6
Section 4.04 Closing Balance Sheet....................................6
Section 4.05 Earn-Out Payments........................................7
Section 4.06 Payment for Pipeline Loans...............................8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................8
Section 5.01 Ownership of the Company and Qualification...............8
(a) The Company--Organization.......................................8
(b) The Company--Evidence of Good Standing and Existence............9
Section 5.02 Capitalization...........................................9
Section 5.03 Ownership of Shares......................................9
Section 5.04 Authorization and Binding Effect........................10
Section 5.05 Corporate Records of Stock Ownership....................10
Section 5.06 Subsidiaries, Affiliates and Joint Ventures.............10
(a) No Subsidiaries................................................10
(b) Affiliates.....................................................10
(c) Joint Ventures and Partnerships................................10
Section 5.07 Insider Transactions....................................11
(a) Company Obligations............................................11
(b) Shareholder Obligations........................................11
(c) Powers of Attorney.............................................11
Section 5.08 Conflicts; Required Filings and Consents................11
(a) Conflicts......................................................11
(b) Required Filings and Consents..................................11
(c) Public Reporting Obligations...................................12
Section 5.09 Licenses, Permits and Eligibility.......................12
(a) Licenses and Permits...........................................12
Section 5.10 Personal Property of the Company........................12
(a) Title to Tangible Personal Property............................12
(b) Owned Personal Property........................................12
(c) Leased Personal Property.......................................13
(d) Operating Condition............................................13
Section 5.11 Accounts Receivable.....................................13
Section 5.12 Tradenames and Intellectual Property Rights.............13
Section 5.13 Bank Accounts...........................................14
Section 5.14 Mortgage Loans..........................................14
(a) Takeout Investors..............................................14
(b) Takeout Commitments............................................14
(c) Pipeline Applications..........................................15
(d) Pipeline Loans.................................................15
(e) Warehouse Loans................................................15
(f) Warehouse Lenders..............................................15
(g) Repurchase and Indemnification Obligations.....................16
(h) Loan Documents, Disbursements and Application of Funds.........16
(i) Appraisals.....................................................16
(j) Servicing Rights...............................................16
(k) Compliance with Insurance Contracts............................16
(l) Compliance with Investor Guidelines............................16
Section 5.15 Owned and Leased Real Property..........................17
Section 5.16 Environmental Matters...................................17
Section 5.17 Financial Statements....................................17
Section 5.18 No Undisclosed Liabilities..............................17
Section 5.19 Employment Matters......................................18
ii
(a) Employee Census................................................18
(b) Wages and Benefits.............................................18
(c) Employee and Director Contracts................................18
(d) Employee Benefit Plans.........................................18
(e) Qualification of Plans.........................................19
(f) Prohibited Transactions........................................19
(g) Compliance with Law............................................19
Section 5.20 Contracts of the Company................................20
(a) Insurance......................................................20
(b) Agreements Restricting Competition.............................20
(c) Letters of Intent..............................................20
(d) Equipment Leases...............................................20
(e) Other Contracts and Agreements.................................20
(f) General Representation and Warranty with
respect to the Company's Contracts...........................20
Section 5.21 Taxes...................................................21
(a) Filing of Returns and Payment of Taxes.........................21
(b) Reserves for Taxes.............................................22
(c) Filing of Returns..............................................22
Section 5.22 Litigation and Judgments................................22
(a) Litigation.....................................................22
(b) No Orders, Judgments or Decrees................................22
Section 5.23 Absence of Certain Changes, Events and Conditions.......23
(a) Changes in Operations..........................................23
(b) Operation in Ordinary Course...................................23
Section 5.24 Brokers.................................................24
Section 5.25 Full Disclosure.........................................24
Section 5.26 No Solicitations........................................24
Section 5.27 Representations with Respect to BUYER'S Shares..........24
(a) Restriction on Shares..........................................24
(b) Accredited Investor............................................25
Section 5.28 Registration Rights with Respect to the Buyer's Shares..26
(a) Definitions....................................................26
(b) Registration Rights............................................26
(c) Shareholders Cooperation.......................................28
(d) Expenses.......................................................28
(e) Indemnification and Contribution...............................28
(f) Certain Limitations on Registration Rights.....................30
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF THE BUYER....................30
Section 6.01 Funds...................................................31
Section 6.02 The Buyer...............................................31
Section 6.03 Brokers.................................................31
Section 6.04 Authorization...........................................31
Section 6.05 Binding Effect..........................................31
Section 6.06 Buyer's Shares..........................................31
ARTICLE VII. ADDITIONAL AGREEMENTS..........................................32
Section 7.01 Conduct of Business by the Company Pending the Closing..32
iii
(a) Preserve Business..............................................32
(b) Maintain Insurance.............................................32
(c) Notice of Suits and Other Proceedings..........................32
(d) Accounting Practices...........................................32
(e) Acquire Consents and Waivers...................................32
(f) Delivery of Supplemental Information...........................32
(g) Certificate of Incorporation and By-Laws.......................33
(h) Capital Structure..............................................33
(i) Dividends and Redemption.......................................33
(j) Changes in Compensation........................................33
(k) Filing of Tax Returns and Tax Reports..........................33
Section 7.02 Access to Information...................................34
(a) Access.........................................................34
(b) Confidentiality................................................34
Section 7.03 Notification of Certain Matters.........................34
Section 7.04 Further Action; Reasonable Efforts......................34
ARTICLE VIII INDEMNIFICATION...............................................34
Section 8.01 Indemnification by the Shareholders.....................34
Section 8.02 Indemnification by the Buyer............................35
Section 8.03 Conditions of Indemnification...........................35
(a) Notification of Claim, Election Period.........................35
(b) Defense of Third Party Claims by Indemnifying Party............36
(c) Disputed Liability, Defense of Third Party Claims..............37
(d) Direct Claims..................................................37
(e) Claims and Disputes............................................38
(f) Payments Of Indemnified Amounts................................39
(g) Limitations on Indemnification.................................39
Section 8.04 Limitations on Indemnification..........................39
(a) Limitations on the Shareholders' Indemnification Obligations...39
(b) The Shareholders' Indemnification Obligations
for Existing Litigation and Claims...........................39
(c) Limitations on Buyer's Indemnification Obligations.............39
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER..............................39
Section 9.01 Termination.............................................39
Section 9.02 Effect of Termination...................................40
Section 9.03 Amendment...............................................40
Section 9.04 Waiver..................................................40
ARTICLE X. GENERAL PROVISIONS..............................................40
Section 10.01 Notices.................................................40
Section 10.02 Expenses of Litigation..................................41
Section 10.03 Parties in Interest.....................................41
Section 10.04 Governing Law...........................................42
Section 10.05 Survival................................................42
Section 10.06 Headings................................................42
Section 10.07 Counterparts............................................42
Section 10.08 Specific Performance....................................42
Section 10.09 Expenses................................................42
iv
Section 10.10 Entire Agreement, Assignment............................43
Section 10.11 Time....................................................43
Section 10.12 Reformation and Severability............................43
Section 10.13 Preparation and Filing of Tax Returns...................43
Section 10.14 News Releases...........................................43
DEFINITIONS.................................................................45
v
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of July30,
1999 by and among ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a resident of Atherton, California and ▇▇▇▇
▇▇▇▇▇▇▇▇, a resident of Saratoga, California, (herein the "Shareholders"), and
Transnational Financial Network, Inc., a California corporation (the "Buyer"),
W I T N E S S E T H:
WHEREAS, the Shareholders collectively own One Hundred Thousand
(100,000) shares of the common stock of L.R.S., Inc., a California Sub-Chapter
"S" Corporation (the "Company") constituting 100% of the issued and outstanding
common shares of the Company; and
WHEREAS, BUYER desires to purchase all of the issued and outstanding
shares of the Company and the Shareholders collectively desire to sell all of
the Company's shares to the Buyer upon the terms and conditions set forth
herein;
ARTICLE I.
DEFINITIONS
Definitions.
As used in this Agreement the capitalized terms set forth herein shall
have the meanings indicated in Exhibit A, unless the context or use indicates
another or different meaning.
ARTICLE II.
PURCHASE AND SALE OF STOCK
Purchase and Sale of Stock.
Subject to the terms and conditions hereof and subject to the
conditions precedent to Closing set forth in Section 3.01 hereof, the Buyer
agrees (a) to purchase from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Sixty Thousand (60,000) shares (the
"▇▇▇▇▇▇▇ Shares") of the issued and outstanding common stock of the Company
which shares shall constitute, at Closing, 60% of the total issued and
outstanding shares of the common stock of the Company and shall constitute all
shares of stock owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the Company; (b) to purchase from
▇▇▇▇ ▇▇▇▇▇▇▇▇ Forty Thousand (40,000) shares (the "▇▇▇▇▇▇▇▇ Shares") of the
issued and outstanding common stock of the Company which shares shall constitute
at Closing 40% of the total issued and outstanding shares of the common stock of
the Company and shall constitute all shares of stock owned by ▇▇▇▇ ▇▇▇▇▇▇▇▇ in
the Company.
Sale of Shares.
Subject to the terms and conditions hereof and subject to the
conditions precedent to Closing, set forth in Section 3.02 hereof, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ agrees to sell, transfer and convey, at Closing, all of the right, title
and interest in and to the ▇▇▇▇▇▇▇ Shares to Buyer, free and clear of all
Encumbrances. Subject to the terms and conditions hereof and subject to the
conditions precedent to Closing set forth in Section 3.02 hereof, ▇▇▇▇ ▇▇▇▇▇▇▇▇
agrees to sell, transfer and convey, at Closing, all of the right, title and
interest in and to the ▇▇▇▇▇▇▇▇ Shares to Buyer, free and clear of all
Encumbrances. Collectively, the ▇▇▇▇▇▇▇ Shares and the ▇▇▇▇▇▇▇▇ Shares are
referred to herein as the "Shares."
ARTICLE III.
CONDITIONS TO CLOSING
AND
CLOSING
Conditions Precedent to the Obligations of Buyer.
The obligations of the Buyer to effect the Closing, to purchase the
Shares and perform its obligations hereunder are and shall be subject to the
prior fulfillment of each of the following conditions:
(a) The ▇▇▇▇▇▇▇ Employment Agreement.
The execution and delivery at Closing by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of the
employment agreement attached hereto as Section 3.01 Schedule (a).o
(b) The ▇▇▇▇▇▇▇▇ Employment Agreement.
The execution and delivery at Closing by ▇▇▇▇ ▇▇▇▇▇▇▇▇ of the
employment agreement attached hereto as Section 3.01 Schedule (b).o
(c) Delivery of Stock Certificates.
The Delivery to Buyer, at Closing, of stock certificates evidencing all
of the issued and outstanding shares of stock of the Company,
registered in the name of the Buyer or accompanied by stock powers
sufficient for transfer thereof to the Buyer (or its designee).
(d) Completion of Exhibits and Schedules.
The Delivery of all of the Exhibits and Schedules, updated through the
Closing Date, required hereunder to be delivered by Sellers.
(e) Delivery of Opinion Letter.
The delivery to Buyer of the Opinion of the Shareholders' counsel
attached hereto as Section 3.01 Schedule (e) o.
(f) Delivery of Consents and Approvals.
Receipt by Buyer, in form and substance satisfactory to Buyer, of all
consents, estoppel certificates, approvals, authorizations, waivers,
modifications, renewals or replacements to maintain in full force and
effect each of the Company's contracts, licenses, franchises, leases or
other material agreements set forth on the Schedules hereto or
otherwise required for the operation of the business of the Company as
conducted on the date of this Agreement or contemplated by the
transactions hereunder.
(g) Correctness of Representations and Warranties, Compliance with
Agreement. Except for changes permitted or contemplated hereby or
consented to by the Buyer and except for matters waived or consented to
by the Buyer
2
pursuant to Section 9.04: (i) the representations and warranties of the
Shareholders contained in this Agreement shall be true and correct in
all material respects on and as of the Closing, with the same force and
effect as if made as of the Closing, and (ii) all of the agreements
contained in this Agreement to be performed or complied with by the
Shareholders, at or before the Closing, shall have been performed or
complied with in all material respects.
(h) Absence of Legal Restraints.
There shall have been no order or preliminary or permanent injunction
entered in any action or proceeding before any court or governmental,
administrative or regulatory authority or agency, or no other action
taken, or statute, rule, regulation, legislation, interpretation,
judgment or order enacted, entered, enforced, promulgated, amended,
issued or deemed applicable to the Buyer, the Company or the
Shareholders, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency which
shall have remained in effect and which shall have had the effect of:
(i) making illegal, delaying or otherwise directly or indirectly
restraining or prohibiting or making more costly the purchase of the
shares by the Buyer as contemplated hereby, or the consummation of the
transactions hereunder; (ii) prohibiting or limiting the ownership or
operation by the Buyer of the Company or of all or any material portion
of the business or assets of the Company, or compelling the Company to
dispose of or hold separate all or any portion of the business or
assets of the Company as a result of the transactions hereunder; (iii)
imposing or confirming limitations on the ability of the Buyer or any
of its Affiliates to exercise full rights of ownership of any of the
Shares, including, without limitation, the right to vote any Shares
acquired by the Buyer pursuant hereto; or (iv) having an Adverse Effect
on the Company, taken as a whole. There shall not be pending or
threatened before any court or governmental, administrative or
regulatory authority or agency, any action or proceeding instituted by
any governmental, administrative or regulatory authority that seeks to
have any of the effects specified in this Section.
(i) Absence of Bankruptcy Proceedings.
No proceeding shall have been instituted or consented to by or against
the Company seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief, or composition of its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or any
substantial part of its property (each such action being a "Bankruptcy
Proceeding"), and the Company shall not have taken any corporate action
to authorize any Bankruptcy Proceeding.
(j) Absence of Adverse Effect.
No fact, event or condition (financial or otherwise) shall have
occurred with respect to the Company, which individually or in the
aggregate, constitutes an Adverse Effect.
(k) Termination of Options to Purchase Shares.
All options to purchase the stock of the Company or any shareholder
3
buy-sell or stock restriction agreements shall be terminated at or
prior to the Closing.
(l) Release of Pledged Shares and Full Release from ▇▇▇▇ ▇▇▇.
The Sellers shall deliver at Closing a full and complete release of all
interests ▇▇▇▇ ▇▇▇ may have in the Shares or the Company.
(m) Payment of Shareholder Obligations to the Company.
On or before the Closing, all shareholder loans, debts or other
obligations owed by the Shareholders to the Company shall have been
paid in full.
(n) Delivery of Investment Letters.
Delivery by each of the Shareholders of Investment letters
substantially in form attached hereto as Section 3.01 Schedule (n)o.
(o) Receipt of other documents.
Receipt by Buyer at or before Closing of such other documents as are
required by this Agreement or as the Buyer shall reasonably request.
Conditions Precedent to the Obligations of the Shareholders.
The obligations of the Shareholders to effect the Closing, the sale of
the Shareholders' Shares and the Shareholders' duties to perform their
obligations hereunder are and shall be subject to the prior fulfillment of each
of the following conditions:
(a) The ▇▇▇▇▇▇▇ Employment Agreement.
The execution and delivery at Closing by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of the
employment agreement attached hereto as Section 3.01 Schedule (a).
(b) The ▇▇▇▇▇▇▇▇ Employment Agreement.
The execution and delivery at Closing by ▇▇▇▇ ▇▇▇▇▇▇▇▇ of the
employment agreement attached hereto as Section 3.01 Schedule (b).
(c) Payment of the Purchase Price.
The payment to the Shareholders of the Purchase Price required to be
paid and the delivery by Buyer of the Buyer's shares at Closing as set
forth in Section 4.02.
(d) Completion of Exhibits and Schedules.
Delivery of all of the Exhibits and Schedules, updated through the
Closing Date, required hereunder to be delivered by Buyer.
(e) Correctness of Representations and Warranties, Compliance with
Agreement. Except for changes permitted or contemplated hereby or
consented to by the Shareholders and except for matters waived or
consented to by the Shareholders pursuant to Section 9.04: (i) the
representations and warranties of the Buyer contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing, with the same force and effect as if made as of the Closing,
and (ii) all of the
4
terms of the agreements contained in this Agreement to be performed or
complied with by the Buyer, at or before the Closing, shall have been
performed or complied with in all material respects.
(f) Receipt of other documents.
Receipt by the Shareholders at or before Closing of such other
documents as are required by this Agreement or as the Shareholders
shall reasonably request.
(g) Delivery of Consents and Approvals.
Receipt by Shareholders, in form and substance satisfactory to
Shareholders, duly adopted corporate resolutions of Buyer, certified by
its corporate secretary, authorizing the transactions contemplated by
this Agreement, including, without limitation, the issuance of the
Buyer's Shares (as herein defined) to the Shareholders and the
execution and delivery of this Agreement and all related documents by
an authorized officer of each corporation.
(h) Supplemental Information.
The Buyer will deliver to Shareholders, at the Closing, supplemental
information updating the information set forth in each Schedule of
Buyer hereto, so that such Schedules as supplemented by such
information, will be true and correct as if the representations and
warranties contained therein made as of the date of this Agreement were
made, in addition, as of the Closing Date.
(i) Release of Pledged Shares and Full Release from ▇▇▇▇ ▇▇▇.
The Sellers shall have received a full and complete release of all
interests ▇▇▇▇ ▇▇▇ may have in the Shares or the Company.
Closing. 03
The Closing of the purchase and sale shall take place on July 30 1999
at the offices of Transnational Financial Network, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ , provided that in the event the Closing does not occur
on or before August 12, 1999, this Agreement shall terminate and the obligations
of the parties shall expire, unless extended in writing by all parties. At the
Closing, the parties shall prepare a mutually agreeable Closing Statement
reflecting the transfer of funds, adjustments to the Purchase Price and other
matters to correctly reflect the transactions at Closing. The Closing Statement
shall be attached hereto as Section 3.03 Schedule (a)o.
ARTICLE IV.
PURCHASE PRICE
AND
PURCHASE PRICE ADJUSTMENTS
Purchase Price.
Subject to the Post-Closing Adjustment, the Purchase Price for the
Shares shall be an amount equal to (a) the Estimated Net Worth of the Company
(as herein defined) to be paid in cash at the Closing; (b) the Cash Purchase
5
Price in the amount of $1,500,000; (c) Five Hundred Seventy Nine Thousand Three
Hundred Ten Shares (579,310) of the Buyer's common stock (the "Buyer's Shares");
and (d) the Earn-Out Payments (as herein defined).
Payment of the Purchase Price.
The Purchase Price shall be paid by Buyer as follows:
(a) Purchase Price paid for ▇▇▇▇▇▇▇ Shares.
The Purchase Price for the ▇▇▇▇▇▇▇ Shares shall be an amount equal to
Sixty Percent (60%) of the Estimated Net Worth and Cash Purchase Price
and 347,586 of Buyer's Shares. The cash amount payable to ▇▇▇▇▇▇▇ shall
be paid in form acceptable to ▇▇▇▇▇▇▇; and,
(b) Purchase Price paid for ▇▇▇▇▇▇▇▇ Shares.
The Purchase Price for the ▇▇▇▇▇▇▇▇ Shares shall be an amount equal to
Forty Percent (40%) of the Estimated Net Worth and Cash Purchase Price
and 231,724 Buyer's Shares. The cash amount payable to ▇▇▇▇▇▇▇▇ shall
be paid in form acceptable to ▇▇▇▇▇▇▇▇.
Preliminary Closing Balance Sheet.
On or before two (2) days prior to Closing, the Shareholders shall
deliver to Buyer a Preliminary Closing Balance Sheet attached hereto as Section
4.03 Schedule (a) osetting forth the Estimated Net Worth of the Company as of
the Closing prepared by the Company's accounting firm and prepared in accordance
with GAAP. For purposes of this Agreement, Net Worth shall mean the book value
of the Company's Assets, less any intangible assets as of the Closing reduced by
the book value of the Company's Liabilities (which liabilities shall include all
accrued employee wages, commissions and benefits, including without limitation,
accrued vacation benefits) and any dividends or other payments to be paid the
Shareholders at or prior to Closing. The Preliminary Closing Balance Sheet shall
be used by the parties hereto for the purposes of determining the Estimated Net
Worth to be paid to the Shareholders as part of the Purchase Price in accordance
with Section 4.02, unless the Buyer objects to the determination of the
Estimated Net Worth shown on the Preliminary Closing Balance Sheet on or before
the Closing. The Estimated Net Worth shall be subject to adjustment in
accordance with Section 4.04.
Closing Balance Sheet.
Within sixty (60) days following the Closing, the Buyer shall cause its
accounting firm, Deloitte & Touche, to conduct an audit and prepare an auditor's
report with respect to the Company in accordance with GAAP and shall deliver to
the Shareholders a Closing Balance Sheet and a calculation of Audited Net Worth,
determined in accordance with this Section. In addition, Deloitte & Touche shall
prepare a calculation of the California Subchapter S tax differential resulting
to the Shareholders as a result of the Section 338 Election set forth
hereinabove and a purchase of the Shareholder's Shares without a Section 338
Election. The Buyer agrees to pay to the Shareholders an amount equal to Fifty
Percent (50%) of such tax differential as additional Purchase Price; provided,
however such additional Purchase Price shall be included in the calculation of
the tax differential for California Subchapter S taxes only.
6
In the event the Audited Net Worth of the Company, determined in
accordance with this Section, is less than the Estimated Net Worth, then the
Purchase Price shall be reduced by the difference between the Audited Net Worth
and the Estimated Net Worth. In the event the Audited Net Worth is greater than
the Estimated Net Worth, then the Purchase Price shall be increased by the
difference between the Audited Net Worth and the Estimated Net Worth.
Any reduction in the Purchase Price as a result of the Audited Net
Worth being less than the Estimated Net Worth shall be paid to Buyer by the
Shareholders, on the Settlement Date (as herein defined), by cashiers check or
wire transfer to an account designated by Buyer. Any increase in the Purchase
Price as a result of Audited Net Worth exceeding Estimated Net Worth shall be
paid to the Shareholders by the Buyer on the Settlement Date, by cashier's check
or wire transfer.
The Shareholders shall, within twenty (20) days of Shareholders'
receipt of the Audited Net Worth from the Buyer, notify the Buyer, in writing,
that the Shareholders either: (a) accept the calculation of the Audited Net
Worth shown on the Closing Balance Sheet or (b) disagree with the calculation of
the Audited Net Worth and the Shareholders shall specify in detail any items
which the Shareholders dispute, including the dollar amounts in dispute, the
basis for the disagreement and the Shareholder's calculation of the disputed
item. If the Shareholders and the Buyer cannot agree upon any disputed items
within twenty (20) days after receipt by the Buyer of a disputed claim by the
Shareholders, then such disagreement shall be submitted to arbitration in
accordance with the rules of the American Arbitration Association. The
arbitrator selected pursuant to the rules of the American Arbitration
Association shall be a certified public accountant. The Shareholders and the
Buyer shall each prepare a written submission for delivery to the other party
and the Arbitrator setting forth the items which remain in dispute and the
position of such party with respect to the disputed item. Failure of a party to
submit such a written statement on or prior to the date the matter is submitted
for arbitration shall constitute an irrevocable waiver by the non-submitting
party with respect to any or all items which are not subject to such party's
submission. The determination by arbitration shall be final and binding on the
parties hereto and the responsibility of the payment of costs of the arbitration
shall be one of the issues submitted to arbitration. The date upon which the
Shareholders and the Buyer agree upon the Audited Net Worth and the Post-Closing
Adjustment, in accordance with this Section shall be the Settlement Date.
Earn-Out Payments.
As part of the Purchase Price, the Buyer shall pay to the Shareholders,
an amount equal to the fifty percent (50%) of the pre-tax earnings of the L.R.S.
cost center for the twelve (12) month period beginning August 1, 1999 and ending
July 31, 2000 (the "First Earn-Out Period), not to exceed Three Million Dollars
($3,000,000), with payment to be made by the Buyer to the Shareholders on or
before October 31, 2000. Additional Earn-Out Payments shall be paid by the Buyer
to the Seller for each of the next succeeding three (3) twelve month periods in
an amount equal to 50% of the pre-tax earnings of the Company; provided, that if
such payments, when aggregated with the Earn-Out Payment for the First Earn-Out
Period shall not exceed Three Million Two Hundred Thousand Dollars ($3,200,000).
Payments for each of the succeeding Earn-Out Periods shall be made for such
period on or before September 30 of each such year.
7
The pre-tax earnings used for the purpose of calculating the Earn-Out
Payments shall be based upon the earnings of the Company's business operated as
a separate cost center (the "LRS Cost Center") subsequent to the sale of Shares
contemplated herein and shall include as income the loan fees, origination fees,
gain on the sale of retail, wholesale and sub prime loans reduced by operating
expenses for the cost center Income and Expense for the purpose of the
foregoing, shall not include (a) any of the Buyer's corporate management or
overhead charged to the cost center operation, but shall include compensation
paid to the Shareholders pursuant to their Employment Agreements; (b) any
interest income or interest expense related to the warehouse line and loans held
for sale; (c) any income or expenses associated with the consolidation of the
Buyer's San ▇▇▇▇ office with the Company's office, including, but not limited to
any wholesale volume related to the Buyer's San ▇▇▇▇ account representatives and
the Buyer's Tustin's account representatives; and (d) any additional cost
centers or loan production business assigned to the Executive to manage from and
after the Closing Date. During the Earn-Out Period, the Buyer covenants and
agrees that it will not move or allow existing personnel from the LRS Cost
Center to move to any other location or affiliate of Buyer, without the written
consent of the Shareholders, which will not be unreasonably withheld. In
addition, the Buyer covenants and agrees the during the Earn-Out Period, the
Buyer will not transfer any existing business operations or functions from the
LRS Cost Center without the written consent of the Shareholders. During the
Earn-Out Period, the Shareholders shall have the right to approve or reject any
proposed increase in costs allocated to the LRS Cost Center, including, but not
limited to increases in employee compensation (exclusive of pension or other
employee benefits applicable to employees generally of Buyer), allocation of
depreciation and amortization, except with respect to depreciation and
amortization applicable to approved capital expenditures for the LRS Cost Center
and other cost allocations which may impact the LRS Cost Center.
Payment for Pipeline Loans.
On the Settlement Date, the Buyer shall pay to the Shareholders an
amount equal to fifty percent (50%) of the sum of loan fees received by the
Buyer with respect to loans closed within thirty (30) days of the Date of
Closing and which were Pipeline Loans as of the Closing Date reduced by any
commissions due or plus or minus any marked to market value including hedging
gains or losses. On the Settlement Date, the Buyer shall pay to the Shareholders
an amount equal to one hundred percent (100%) of any fees or receipts on loans
which were funded prior to the Date of Closing reduced by any commissions due or
other costs with respect to such loans; provided, however, that such fees were
not accrued in the Preliminary Closing Balance Sheet.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders jointly and severally represent and warrant to
Buyer, as of the date hereof and on the Closing Date that all of the
representations and warranties contained herein are true and correct and agree
as follows:
Ownership of the Company and Qualification.
(a) The Company--Organization.
The Company is a corporation duly organized, validly existing under the
8
laws of the State of California, and has the full corporate power and
authority to own, lease and operate its properties and carry on its
business in all respects as presently owned or conducted. The Company
is duly qualified or licensed as a foreign corporation to do business,
in each jurisdiction where its ownership or leasing of property or the
conduct of its business requires such qualification. Attached hereto as
Section 5.01 Schedule (a)o are (i) a true and complete copy of the
Articles of Incorporation of the Company, certified by the Secretary of
State of the State of California; and, (ii) a true and complete copy of
the By-Laws of the Company, certified by the Secretary of the Company,
as in effect as of the date of such certification. The Company has
operated under the corporate name "L.R.S., Inc. since 1995 and has not
received notice of any challenge to its right to use such name and has
done business as Amerimac Cal West, Bay Cities Relocation and First
Intercity Mortgage since that time and has properly registered its use
of such names under California law.
(b) The Company--Evidence of Good Standing and Existence.
The Company is a corporation in good standing under the laws of the
State of California and in each foreign jurisdiction in which the
Company is qualified as a foreign corporation to transact business.
Attached hereto as Section 5.01 Schedule (b)o are: (i) a copy of a
certificate of good standing from the Secretary of State of the State
of California evidencing the due organization, valid existence and good
standing of the Company in the State of California; and, (ii) if
applicable, a certificate from the Secretary of State of each foreign
jurisdiction where the Company is qualified to transact business
evidencing the due organization, valid existence and good standing of
the Company in such foreign jurisdiction.
Capitalization.
The authorized capital stock of the Company consists of 1,000,000
shares of common stock, no par value per share, of which One Hundred
Thousand(100,000) shares are issued and outstanding, all of which have been duly
and validly issued, are fully paid and non-assessable, and are not subject to
any preemptive or other similar rights. Section 5.02 Schedule (a)o sets forth a
list of the number of shares of the common stock owned of record and
beneficially by the Shareholders. The Company has not authorized, or issued and
has no outstanding shares of stock other than those specified above or any
securities convertible into or exchangeable for capital stock. The Company has
no commitment, agreement or arrangement to authorize or issue any shares of
stock other than those specified above or any securities convertible into or
exchangeable for capital stock. There are no outstanding contractual obligations
of the Shareholders or the Company to repurchase, redeem or otherwise acquire
any of the capital stock of the Company or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other entity.
Ownership of Shares.
The Shareholders have good and valid title to the Shares, free and
clear of all liens, claims, charges, or other encumbrances, with full lawful
right, power, capacity and authority to sell, assign, transfer and deliver the
Shares to Buyer pursuant to this Agreement, to execute and deliver this
9
Agreement, and to consummate the transactions contemplated hereby; and there are
no agreements, arrangements, or understandings restricting or otherwise relating
to the transfer or voting of the Shares. At the Closing, the Buyer will receive
good and valid title to the Shares, free and clear of all liens, claims, charges
or other encumbrances of any nature whatsoever.
Authorization and Binding Effect.
Each of the Shareholders has the full power and authority to execute
and deliver this Agreement, the other agreement(s) contemplated hereby to which
a Shareholder is a party and to perform the Shareholder's obligations in this
Agreement and in each document to which the Shareholder is a party. This
Agreement constitutes and each such other document when executed and delivered
by a Shareholder, will constitute the legal, valid and binding obligation of
each Shareholder enforceable in accordance with its terms and the execution and
delivery of this Agreement and the consummation of the transactions
contemplated: (i) are permissible under the Certificate of Incorporation and
Bylaws of the Company, and (ii) have been duly and validly authorized by all
necessary and appropriate corporate action by the Board of Directors and
Shareholders, if applicable, of the Company.
Corporate Records of Stock Ownership.
The stock transfer books and stock ledgers of the Company are true,
complete, accurate and up to date, and contain all necessary signatures, and set
forth all of the Shares issued, transferred and surrendered. No transfer has
been made without surrender of the proper certificate, duly endorsed, and all
certificates so surrendered have been duly canceled and are attached thereto.
Subsidiaries, Affiliates and Joint Ventures.
(a) No Subsidiaries.
The Company does not directly or indirectly own securities or other
ownership interests of any corporation or other entity having ordinary
voting power to elect a majority of the board of directors of such
corporation or other entity or other persons performing similar
functions.
(b) Affiliates.
Except as set forth on Section 5.06 Schedule (b)o, none of the
Shareholders has any direct or indirect interest (other than the
ownership of less than 1% of the outstanding securities of a publicly
held company) in any corporation or business which is involved in or
competes with any business conducted by the Company.
(c) Joint Ventures and Partnerships.
The Company is not a general or limited partner of, or a party to any
joint venture with, any other entity, and the Company does not,
directly or indirectly, own any interest in any other corporation,
partnership, joint venture or other business association or entity.
10
Insider Transactions.
(a) Company Obligations.
Except as set forth in Section 5.07 Schedule (a)o, the Company is not
indebted to any of the Shareholders, or any director, officer, employee
or agent of the Shareholders, or any Affiliate of a Shareholder, except
for amounts due as normal salary, wages, or reimbursement of ordinary
business expenses, and no director, officer, employee or agent of the
Company is indebted to the Company except for ordinary business expense
advances.
(b) Shareholder Obligations.
Except as set forth in Section 5.07 Schedule (b)o, none of the
Shareholders nor any of their Affiliates has any direct or indirect
indebtedness to the Company or any direct or indirect interest in any
property used by, or relating to, the Company, except through the
ownership of the Shares.
(c) Powers of Attorney.
Set forth in Section 5.07 Schedule (c)o are the names of all persons
holding powers of attorney from the Company and copies of such powers
of attorney.
Conflicts; Required Filings and Consents.
(a) Conflicts.
To the best of the Shareholders' knowledge, the execution and delivery
of this Agreement and each other document to which the Shareholders are
a party do not, and the performance of this Agreement and each other
document (including, without limitation, the consummation of the
transactions contemplated hereunder) will not: (i) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable
to the Shareholders or the Company or by which they or any of their
respective properties are bound or affected, or (ii) except as set
forth in Section 5.08 Schedule (a)o result in any breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or
assets of the Shareholders or the Company pursuant to any agreement,
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, insurance policy or other instrument or obligation to which the
Shareholders or the Company is a party, or by which the Shareholders or
the Company, they or any of their respective properties are bound or
affected; or, (iii) result in the creation of or impositions of any
Lien on the Shares or any asset of the Company.
(b) Required Filings and Consents.
To the best of the Shareholders' knowledge, the execution and delivery
of this Agreement by the Shareholders do not, and the performance of
11
this Agreement by the Shareholders (including, without limitation, the
consummation of the transactions contemplated hereunder) will not,
require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority,
domestic or foreign, on the part of the Shareholders or the Company.
(c) Public Reporting Obligations.
The Company does not have presently and has not had in the past any
obligation to file annual reports or other documents under the
Securities Exchange Act of 1934, as amended, and no such reports have
been filed.
Licenses, Permits and Eligibility.
(a) Licenses and Permits.
To the best of the Shareholders' knowledge, the Company has obtained
all permits, licenses and other authorizations that are required under
federal, state and local laws necessary for the lawful conduct of the
business, including, but not limited to all licenses required for the
origination, purchase and sale of mortgage loans. Except as set forth
in Section 5.09 Schedule (a)o, the execution and delivery of this
Agreement and the transactions contemplated hereby, will not result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any terms, conditions or provisions of any such
permit, license or other authorization. To the best of the
Shareholders' knowledge the Company is in compliance with all terms and
conditions of any and all required permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables required by such authorizations.
Attached as Section 5.09 Schedule (a) are copies of all licenses,
permits and authorizations held by the Company.
Personal Property of the Company.
(a) Title to Tangible Personal Property.
Except as set forth in Section 5.10 Schedule (a)o, the Company has and
at the Closing, will have good, indefeasible, marketable and
merchantable title, free and clear of all claims and encumbrances of
any nature whatsoever, to all tangible personal property, (including,
but not limited to, all equipment, furniture, fixtures, inventory,
supplies, accounts receivable and other intangible personal properties)
reflected in the Preliminary Balance Sheet (as herein defined) and all
fully depreciated items of Tangible Personal Property.
(b) Owned Personal Property.
Attached hereto as Section 5.10 Schedule (b)o is a true and complete
list of all personal property owned by the Company.
12
(c) Leased Personal Property.
Attached hereto as Section 5.10 Schedule (c)o is a true and complete
list of all personal property leased by the Company. Copies of all
leases for the Tangible Personal Property set forth in Section 5.10
Schedule (c) have been delivered to Buyer.
(d) Operating Condition.
All of the assets constituting personal property owned or leased by the
Company are in good operating condition and repair, ordinary wear and
tear excepted, and all machinery, equipment and motor vehicles owned or
used by the Company are generally adequate and sufficient for the
operation of the Company's business, except for repairs and
replacements required in the ordinary course of business.
Accounts Receivable.
Except as set forth on Section 5.11 Schedule (a)o, the Company is the
true and lawful owners of its accounts receivable and has good and clear title
to each account, free and clear of all Liens and Encumbrances, with the absolute
right to transfer any interest therein. Each account receivable is: (i) a valid
obligation of the account debtor, enforceable in accordance with its terms, and
not subject to any set-offs, adverse claims, assessments, defaults, prepayments,
defenses and conditions precedent, (ii) a true and correct statement of the
account of actual services performed for and accepted by such account debtor,
and (iii) collectible in full through the exercise of usual and customary
collection practices in the industry.
Tradenames and Intellectual Property Rights.
Attached hereto as Section 5.12 Schedule (a)o is a list of each trade
name or other corporate name used by the Company and a list of all other
patents, copyrights, registrations or applications with respect thereto,
licenses (including software licenses) or other rights with respect thereto
owned or used by the Company in the conduct of its business (collectively, the
"Intellectual Property All software and computer hardware, and telephone systems
of the Company are Year 2000 Compliant. To the best of the Shareholders'
knowledge, all Intellectual Property is valid, subsisting, unexpired,
enforceable and has not been abandoned. No holding decision or judgment has been
rendered by any governmental authority which would limit, cancel or question the
validity of any Intellectual Property. Except as set forth in Section 5.12
Schedule (a), to the best of the Shareholders' knowledge, the Company owns valid
title to the Intellectual Property, free and clear of all Encumbrances and the
Intellectual Property is not bound by or a party to any options, licenses or
agreements of any kind with any other Persons. In each case where a registration
or application for registration is held by the Company by assignment, the
assignment has been duly recorded with the U.S. Patent and Trademark Office. To
the best of the Shareholders' knowledge, no act is pending based upon or
challenging or seeking to deny or restrict the use by the Company of any of the
Company's Intellectual Property nor has any such action been threatened. The
Company has not granted any license to any other Person with respect to the
Company's Intellectual Property. Except as set forth in Section 5.12 Schedule
(a), the Shareholders are not aware of any third parties using or infringing any
of the Company's Intellectual Property or any marks or names that are
confusingly similar thereto. The Shareholders are not aware that any of the
Company's employees or consultants is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
13
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of his or her best efforts to promote or secure the
Intellectual Property or that would conflict with the Company's business. None
of the Company's employees have any right, title, interest or claim to the
Intellectual Property of the Company. No unlicensed Intellectual Property that
is owned by an employee, consultant or other Person is necessary for the conduct
of the business of the Company. The consummation of the transactions hereunder
will not result in the termination or impairment of any of the Company's
Intellectual Property. The representations and warranties set forth in this
Section shall not apply to any "shrinkwrap" software licenses owned or used by
the Company.
Bank Accounts.
Attached hereto as Section 5.13 Schedule (a)o are (i) the name and
address of each bank or other institution with which the Company has an account
relationship or safe deposit box, (ii) the name(s) of all persons authorized by
the Company to withdraw or borrow funds or to open any safe deposit box, and
(iii) the number of or other method of identifying each such account or safe
deposit box.
Mortgage Loans.
(a) Takeout Investors.
Attached hereto as Section 5.14 Schedule (a)o is a true, complete and
accurate list of each Takeout Investor that holds, as of the Closing
Date, Mortgage Loans sold by Company or which has made a Takeout
Commitment to the Company as of the Closing Date, together with a
listing of the amount of such Mortgage Loans and Takeout Commitments;
and, if applicable, the aggregate balance of all escrow deposit
accounts maintained by the Company with each such Takeout Investor,
including account number of such escrow accounts, as of the Closing
Date.
(b) Takeout Commitments.
Attached hereto as Section 5.14 Schedule (b)o is a true, complete and
accurate list of all Takeout Commitments as of the Closing Date. Each
Takeout Commitment is a valid and binding obligation of the parties
thereto enforceable in accordance with its terms, and is in full force
and effect. Except in the ordinary course of business, no Takeout
Commitment is subject to any pledge, lien, assignment or other
encumbrance. Except as set forth on Section 5.14 Schedule (b), the
Company is not subject or bound by any other commitments to sell or
deliver Mortgage Loans. The execution and delivery of this Agreement or
the transactions contemplated hereby, shall not result in a default (or
give rise to any right of termination, cancellation or acceleration)
under any terms, conditions, or provisions of any Takeout Commitment or
require waivers and consents of any party. There is not, under any of
the Takeout Commitments, any existing default or other event which,
with or without due notice or lapse of time or both, would constitute a
default or event of default on the part of the Company or could
reasonably be anticipated to result in any Takeout Commitment being
terminated by any party thereto.
14
(c) Pipeline Applications.
Attached hereto as Section 5.14 Schedule (c)o is a true, complete and
accurate list of all Pipeline Applications (other than Pipeline Loans),
as of the Closing Date. The employees of the Company originated all
Pipeline Applications.
(d) Pipeline Loans.
Attached hereto as Section 5.14 Schedule (d)o is a true, complete and
accurate list of all Pipeline Loans, as of the Closing Date. Except as
set forth in Section 5.14 Schedule (d), the Company is not obligated,
directly or indirectly, to any person or entity, to extend credit,
fund, purchase or lend funds to any borrower or potential borrower. The
employees of the Company originated all Pipeline Loans. Except as set
forth on Section 5.14 Schedule (d) and retail Pipeline Loans, all
Pipeline Loans are covered by Takeout Commitments.
(e) Warehouse Loans.
Attached hereto as Section 5.14 Schedule (e)ois a true, complete and
accurate list of all Warehouse Loans, identifying such loans by
borrower name, lender, loan number, Takeout Investor (if applicable),
collateral value, date of note, Takeout Commitment expiration date, the
date such loan becomes ineligible as a Warehouse Loan, and the last
date of payment on all loans over ninety (90) days. Each Warehouse
Loan, except as listed in Section 5.14 Schedule (e), qualifies, as of
the Date of Closing, as a loan qualified by the lender applicable
thereto as a loan eligible for inclusion in the warehouse line of
credit. Except for the security interests held by each lender with
respect to the Warehouse Loans, included in such lender's warehouse
line, all such Warehouse Loans are free and clear of any lien, claim,
pledge or other encumbrance of any nature, are in full force and effect
and are not subject to any defaults by any party to such defaults.
(f) Warehouse Lenders.
Attached hereto as Section 5.14 Schedule (f)o is a true, complete and
accurate list of each Warehouse Lender that holds, as of the Closing
Date, Mortgage Loans owned by the Company or which has committed to
establish a line of credit for Mortgage Loans to the Company as of the
Closing Date. The Company has previously supplied to Buyer a true,
complete and accurate copy of all agreements by and between such
Warehouse Lenders and the Company or which is binding upon the Company.
Each line of credit established by a Warehouse Lender is a valid and
binding obligation of the parties thereto enforceable in accordance
with its terms, is in full force and effect. Except as set forth in
Section 5.14 Schedule (f), the Company is not subject or bound to any
other Warehouse Lender. Except as set forth in Section 5.14 Schedule
(f), the execution and delivery of this Agreement and the transactions
contemplated hereby, will not result in a default (or give rise to any
right of termination, cancellation or acceleration) under any terms,
conditions, or provisions of any agreement with any Warehouse Lender or
require waivers and consents of any party. There is not, under any of
the agreements with the Warehouse Lenders, any existing default or
15
other event which, with or without due notice or lapse of time or both,
would constitute a default or event of default on the part of the
Company or could reasonably be anticipated to result in any Warehouse
Lender terminating any agreement with the Company.
(g) Repurchase and Indemnification Obligations.
As of the Closing Date, the Company has not received notice of any
demand to repurchase a Warehouse Loan from any Warehouse Lender, except
for Warehouse Loans set forth in Section 5.14 Schedule (g)o as
ineligible loans nor has the Company received notice from any Takeout
Investor to indemnify a Takeout Investor with respect to: (i) losses on
Mortgages Loans; (ii) penalties resulting from early payoffs; (iii)
repurchase obligations except as set forth on Section 5.14 Schedule
(g).
(h) Loan Documents, Disbursements and Application of Funds.
To the best of the Shareholders' knowledge, all Mortgage Loans were
made or consummated by the Company in accordance with all applicable
laws and regulations, constitute the genuine, legally valid and binding
obligations of the borrowers, duly executed by borrowers of legal
capacity, all insertions to such loan documents were correct when made,
and all monies received or disbursed by the Company with respect to
Mortgage Loans, Takeout Commitments and Warehouse Loans have been
properly received, disbursed and accounted for on the books of the
Company and in all reports to and filings with all Takeout Investors,
Warehouse Lenders, borrowers and regulatory authorities and in
accordance with all rules, regulations and laws applicable to the
Company.
(i) Appraisals.
To the best of the Shareholders' knowledge, with respect to the
property which is the subject of any Mortgage Loans, the Company has
obtained Appraisals in compliance with all Appraisal Laws.
(j) Servicing Rights.
The Company owns no Servicing Rights.
(k) Compliance with Insurance Contracts.
To the best of the Shareholders' knowledge, the Company has complied
with the obligations under all applicable insurance contracts, in
maintaining hazard and flood insurance policies and insurance contracts
with private mortgage insurers in accordance with FNMA, FHLMC or any
Private Investor requirements with respect to the Mortgage Loans and
which might affect Servicing.
(l) Compliance with Investor Guidelines.
To the best of the Shareholders' knowledge, all Mortgage Loans were
made or consummated by the Company in accordance with all applicable
Investor guidelines and compliance requirements.
16
Owned and Leased Real Property.
The Company does not own any interest in any Real Property, except for
its leasehold interests set forth in Section 5.15 Schedule (a)o. To the best
knowledge of the Shareholders, all of the buildings, offices and other
improvements located upon any Leased Real Property and occupied by the Company
are in good repair. To the best knowledge of the Shareholders, none of the
Leased Real Property nor any building, office or other improvement located
thereon is subject to condemnation, nor is any such property or improvement in
violation of any law or any building, zoning or other ordinance, code or
regulation applicable to it. No notice or any advice relating to any Leased Real
Property from any governmental body has been served upon the Shareholders, or
the Company, which has not been complied with, nor are the Shareholders aware of
any contemplated zoning hearing or proceeding with respect to any of the Leased
Real Property and occupied by the Company.
Environmental Matters.
To the best of the Shareholders' knowledge, all facilities and property
presently leased by the Company have been, and continue to be, operated by the
Company in compliance with all applicable Environmental Laws. The Shareholders
and the Company have not received notice of any pending or threatened claims,
complaint or requests for information with respect to any alleged violation of
any Environmental Laws. There have been no releases, as defined under any
Environmental Laws, of Hazardous Substances at, on, from or under any property
now or previously owned or leased by the Company during the period in which any
such property was owned or leased by the Company. The Shareholders and the
Company have not received notice that property presently owned or leased, or
previously owned or leased, by the Company is listed or proposed for listing in
the National Priorities List created pursuant to CERCLA or on the CERCLIS or any
similar state list of sites requiring investigation or cleanup.
Financial Statements.
Attached hereto as Section 5.17 Schedule (a)o are: (1) the audited
balance sheets of the Company as of the end of the Company's fiscal years ended
December 1996, 1997 and 1998, together with the audited statements of income,
stockholders equity and changes in financial position of the Company for such
fiscal years (herein collectively the Financial Statements).
All such Financial Statements and the Preliminary Balance Sheet are:
(i) true, accurate and complete in all respects; (ii) include all notes required
by GAAP, except for the unaudited statements which were not prepared in
accordance with GAAP; and (iii) present fairly the financial position of the
Company at such dates and the results of operations of the Company for such
respective periods, in conformity with generally accepted accounting principles
applied on a consistent basis with prior periods. As of the date of any balance
sheet included in the Financial Statements delivered to Buyer, the Company did
not have any outstanding Indebtedness to any Person or any liabilities of any
kind (including contingent obligations, tax assessments or unusual forward or
long-term commitments) or any unrealized or anticipated loss, which in the
aggregate were Material to the Companies and required to be reflected in those
Financial Statements or in the notes related thereto in accordance with GAAP
which were not so reflected.
No Undisclosed Liabilities.
The Company has no obligations, indebtedness or liabilities, contingent
or otherwise, other than: (i) those disclosed or adequately reserved for in the
17
Preliminary Balance Sheet, (ii) those expressly described or listed in the
Schedules hereto, (iii) immaterial obligations, indebtedness or liabilities
arising in the ordinary course of its business and not required by generally
accepted accounting principles to be recorded in financial statements or notes
thereto.
Employment Matters.
(a) Employee Census.
Attached hereto as Section 5.19 Schedule (a)o is a list, as of the date
of Closing, of the names and current compensation of all of the
officers and employees of the Company, the date of each such
individual's first date of employment with the Company, the position
held by each such individual, such individual's status as a salaried or
hourly employee or commissioned agent and the date of the last change
in compensation for each such individual.
Except for loan officers and other individuals set forth on Section
5.19 Schedule (a), the Company does not employ any agents or
independent contractors receiving regular compensation.
(b) Wages and Benefits.
Except as set forth on Section 5.19 Schedule (b)o attached hereto, no
bonuses, additional compensation or other forms of compensation or
benefits (including, but not limited to, accrued vacation pay, sick pay
or other such benefits) are payable by the Company with respect to
periods ending on or prior to the Closing Date.
(c) Employee and Director Contracts.
Attached hereto as Section 5.19 Schedule (c)ois a true and complete
list and description (with true and complete copies delivered to Buyer)
of all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical, dental or life
insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or
other contracts or agreements with respect to which the Company is a
party (including, without limitation, all director agreements and
non-competition agreements), with respect to which the Company has any
obligation (whether primary or secondary) or which are maintained,
contributed to or sponsored by the Company for the benefit of any
current or former employee, officer or director of the Company.
Except as set forth in Section 5.19 Schedule (c), none of the Contracts
provides for or promises retiree medical, dental or life insurance
benefits to any current or former employee, officer or director of the
Company or their beneficiaries.
(d) Employee Benefit Plans.
Attached hereto as Section 5.19 Schedule (d)o is a true and complete
list and description of (with true and complete copies delivered to
Buyer): (i) all employee benefit plans (within the meaning of Section
18
3(3) of ERISA); and (ii) each employee benefit plan for which the
Company could incur liability under Section 4069 of ERISA, in the event
such plan were terminated, or under Section 4212(c) of ERISA, or in
respect of which the Company remains secondarily liable under Section
4204 of ERISA (herein referred to each individually as a "Plan" and
collectively, the "Plans"). Except as contemplated herein, the Company
has no express commitment: (i) to create, incur liability with respect
to or cause to exist any other employee benefit plan, program or
arrangement; (ii) to enter into any material contract or agreement to
provide compensation or benefits to any individual; or (iii) to modify
or terminate any Plan, other than with respect to a modification or
termination required by ERISA or the Code or this Agreement.
(e) Qualification of Plans.
Each Plan that is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS after
1985 providing that it is so qualified and each trust established in
connection with any Plan that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has received a
determination letter from the IRS after 1985 providing that it is so
exempt and no fact or event has occurred since the date of such
determination letter that could adversely effect the qualified status
of any such Plan or the exempt status of any such trust. None of the
Plans is subject to the laws of any jurisdiction outside of the United
States.
(f) Prohibited Transactions.
There has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan. The
Company has not incurred nor is it expected to incur any liability for
any tax arising under Section 4971, 4972, 4979, 4980 or 4980B of the
Code. None of the employees of the Company currently participates in,
or, within the five years preceding the date hereof, has participated
in, a Plan subject to Title IV of ERISA or Section 412 of the Code, and
the Company has not incurred nor is it expected to incur any liability
under, arising out of or by operation of Title IV of ERISA or Section
412 of the Code. No complete or partial termination has occurred within
the five years preceding the date hereof with respect to any Plan. None
of the assets of the Company is, or is expected to be, the subject of
any lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code. The Company has not been, nor is it expected to be, required to
post any security under Section 307 of ERISA or Section 401(a)(29) of
the Code.
(g) Compliance with Law.
Each Plan is now and has been operated in all respects in accordance
with the requirements of all applicable laws (including, without
limitation, ERISA and the Code) and with the requirements of the terms
of such Plan. All employer contributions, premiums, payments or amounts
required to be made, paid or accrued with respect to any Plan have been
made, paid or accrued on or before their due dates.
19
Contracts of the Company.
(a) Insurance.
All insurance policies of the Company (a true and complete list of
which, with copies supplied to Buyer, is set forth in Section 5.20
Schedule (a)o) are in full force and effect and, taken as a whole, are
comparable in amount and coverage to FNMA guidelines. The Company will
maintain all insurance policies in force, and will pay all premiums due
with respect to such policies through the Closing Date. To the best of
the knowledge of the Shareholders, there are no circumstances existing
which would enable such insurers to avoid liability under the policies
issued by them. There are no pending claims against such insurance
policies of the Company as to which the insurers have denied liability.
There exist no claims under such insurance policies that have not been
properly filed by the Company. No insurance company has canceled any
policy with the Company during the past 18 months.
(b) Agreements Restricting Competition.
Attached hereto as Section 5.20 Schedule (b)o is a list of all
contracts, agreements or understandings to which the Company is a party
or is in any way bound (or which would bind Buyer as a result of the
transactions contemplated in this Agreement) in any way restricting or
purporting to restrict competition, whether with specified persons or
in specified areas or otherwise.
(c) Letters of Intent.
Attached hereto as Section 5.20 Schedule (c)o is a true and complete
list of all outstanding letters of intent proposed and/or executed by
the Company with respect to the sale, leasing or providing of services
by the Company or its affiliates. Complete and accurate copies of all
of the Letters of Intent have been delivered to the Buyer.
(d) Equipment Leases.
Attached hereto as Section 5.20 Schedule (d)o is a true and complete
list of equipment leases proposed or executed by the Company or its
Affiliates requiring the Company as Lessor to provide and/or maintain
equipment or provide services related to such equipment. Complete and
accurate copies of all such Equipment Leases have been delivered to the
Buyer.
(e) Other Contracts and Agreements.
Attached hereto as Section 5.20 Schedule (e)o is a list of all
agreements, contracts, leases, licenses, and commitments, not set forth
on any other Schedule to this Agreement. Complete and accurate copies
of all such Agreements have been delivered to the Buyer.
(f) General Representation and Warranty with respect to the Company's
Contracts. To the best of the Shareholders' knowledge, each agreement,
contract, lease, license, commitment or instrument including but not
limited to
20
any and all franchise agreements and distribution agreements to which
the Company is a party is in full force and effect and constitutes a
legal, valid and binding obligation of the Company and the other
parties thereto, and except as set forth in Section 5.20 Schedule (f)o,
the Company is not in default or breach of (with or without the giving
of notice or the passage of time) any such agreement or instrument. The
Shareholders are not aware of any third party being in breach of any
such agreements and are not aware of an event has occurred which, with
the passage of time, would constitute a default or breach under any
such agreement. Except as set forth in Section 5.20 Schedule (f), all
such agreements or instruments will be in full force and effect and
will constitute legal, valid, and binding obligations of the respective
parties thereto after the consummation of the transaction contemplated
by this Agreement. Except as set forth in Section 5.20 Schedule (f) or
the other Schedules to this Agreement, the Company is not a party to
nor is the Company bound by: (i) any covenant not to compete; (ii) any
contract or agreement not made in the ordinary course of business; or
(iii) other financing agreements or leases to which the Company is a
party on the date hereof; and (iv) any contract or agreement to which
the Company or any of their respective assets or businesses is bound or
subject which has provided for any indemnity rights to a third party by
the Company.
Taxes.n 5.21
(a) Filing of Returns and Payment of Taxes.
All federal, state and local income and other tax returns (including,
without limitation, any and all returns or declarations in respect of
income, estimated real property, personal property, sales, use,
payroll, privilege and other taxes or impositions) of the Company
required to be filed on or before the date hereof have been filed; and
all taxes shown on said returns or on any assessments received by the
Company to be due and payable on or before the date hereof, have been
paid. All taxes and assessments required to have been withheld
(including, but not limited all withholding taxes due with respect to
all employees or independent contractors or others originators of loans
or services for the Company) or collected by the Company have been duly
withheld and collected, and have been duly paid over to the proper
governmental authorities, all as and to the extent prescribed by law.
The Company has not been advised of any deficiency claimed or proposed
to be claimed against or relating to the Company by any taxing
authority which has not been paid, settled or adequately reserved for
by the Company; and there are no matters under discussion with any
taxing authority which might result in the assessment of additional
amounts against or relating to the Company, or any of the assets of the
Company. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the filing of any
returns or the assessment of any tax or deficiency against or relating
to the Company.
21
(b) Reserves for Taxes.
To the best of the Shareholders' knowledge, the Company has sufficient
reserves for the payment of all unpaid federal, state and local taxes
through the Closing Date and for all periods prior thereto, including,
without limitation, all taxes, if any, imposed after such date but in
respect of any period or periods prior to the Closing Date. The
Shareholders have furnished Buyer with true and correct copies of all
federal, state and local tax returns of or in respect of the Company as
actually filed for the three tax years prior to Closing.
(c) Filing of Returns.
All federal and state tax returns required to be filed after the
Closing Date shall be prepared and filed by the Company. Any taxes of
the Company arising from the operations of the Company prior to the
Closing Date shall be the responsibility of the Shareholders.
Litigation and Judgments.
(a) Litigation.
Except as set forth in Section 5.22 Schedule (a)o, there is no legal
proceeding (or governmental investigation) pending before any court or
governmental body, or any other duly constituted tribunal, or to the
best of the Shareholders' knowledge threatened or in prospect, against
or related to the Company, or any of the business or properties
thereof. The Company is not in default with respect to any judgment,
order, writ, injunction, decree or assessment against it by any court,
federal regulatory agency (including, but not limited to FHA, FNMA,
FHLMC and the VA), state attorney general, public service commission,
governmental agency, department or instrumentality. To the best of the
Shareholders' knowledge, neither the Company nor any of its respective
directors, officers or shareholders is in violation of or charged, or
threatened with any violation of, or under investigation with respect
to any violation of, any provision of any federal, state, or local law
or administrative rule or regulation relating to any aspect of the
business or property of the Company (including, without limitation, any
laws, rules, or regulations relating to political contributions or
other questionable payments, including payments or remuneration
prohibited by RESPA) which give rise to any liability on the part of
the Company or have an Adverse Effect upon the business, affairs, or
properties of the Company or the transactions contemplated by this
Agreement. In addition, Section 5.22 Schedule (a) sets forth, as of the
Closing Date, a list of all claims pending or threatened against the
Company by any Person.
(b) No Orders, Judgments or Decrees.
The Company is not subject to any Order, judgment or decree, or any
other legal restriction, which adversely affects its business or the
condition of any of its properties or which would prevent or hinder the
transactions contemplated by this Agreement.
22
Absence of Certain Changes, Events and Conditions.
(a) Changes in Operations.
Since January 1, 1999, there has not been any change in operations or
results of operations of the businesses of the Company having an
Adverse Effect.
(b) Operation in Ordinary Course.
Since January 1, 1999, the Company has been operated only in the
ordinary course. As amplification and not limitation of the foregoing,
except as disclosed in Section 5.23 Schedule (a)o, the Shareholders,
and the Company have not, since January 1, 1999:
(i)
made any change in any method of accounting or accounting practice or
policy used by the Company, other than such changes required by GAAP
that are identified in Section 5.23 Schedule (a);
(ii) made any changes in the customary methods of operations of the Company,
including practices and policies relating to purchasing, marketing,
selling or pricing;
(iii) failed to maintain the Company's plant, property and equipment in good
repair, ordinary wear and tear excepted;
(iv) redeemed any of the Company's capital stock or declared, made or paid
any dividends or distributions (whether in cash, securities or
property) to the Company's shareholders or otherwise with respect to
the Company's capital stock (except for dividends paid the Shareholders
in 1999 and reflected as distributions in the Preliminary Balance
Sheet;
(v) issued or sold any of the Company's stock, notes, bonds or other
securities, or any option or warrant to purchase the same;
(vi) amended or restated the Company's corporate charter or by-laws;
(vii) merged with, been merged with, entered into a consolidation with or
acquired (by purchase, merger, consolidation, stock acquisition or
otherwise) a substantial portion of the assets of any other entity or
business of any other corporation, partnership, association or other
business entity or any division thereof, or otherwise acquired assets
other than in the ordinary course and in accordance with past practice;
(viii) agreed, whether in writing or otherwise, to take any of the actions
specified in this Section 5.23 (a) except for those contemplated by
this Agreement; or
(ix) increased the compensation or fringe benefits payable to any of the
Company's Directors or any of their respective officers or employees
23
whose annual compensation exceeds $20,000 other than normal annual
increases effective in accordance with past practices.
Brokers.5.24
Attached hereto as Section 5.24 Schedule (a)o is a copy of each broker,
finder or investment banker agreement to which the Shareholders or Company is a
party or which entitles such party to a fee, commission or other compensation as
a result of this Agreement or the transactions contemplated hereby. Except as
set forth in Section 5.24 Schedule (a), no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions hereunder based upon arrangements, made by or on behalf of
the Sellers.
Full Disclosure.
No representation or warranty by the Shareholders in this Agreement or
the Schedules hereto contains or, at Closing, will contain any untrue statement
of a material fact, or omits or will at Closing omit to state a material fact
necessary to make the statements therein not misleading. Each material fact or
condition relating to this Agreement, the transactions contemplated hereby and
the financial condition, business or property of the Company has been disclosed
in writing in this Agreement and the Schedules hereto. All information
previously furnished to the Buyer by the Shareholders, and all information to be
furnished by the Shareholders, will be true and accurate in all material
respects.
No Solicitations.
Until this Agreement is terminated, the Shareholder's agree not to
solicit or initiate (including by way of furnishing any information concerning
the business, properties or assets of the Company) discussions, inquiries or
proposals, or participate in any negotiation for the purpose, or with the
intention, of entering into any agreement or arrangement concerning the
acquisition of the shares or the sale of substantially all of the assets of the
Company, except in connection with the transactions contemplated herein. Such
parties shall immediately advise Buyer of any such inquiry or proposal. The
parties further agree not to disclose the existence or contents of this
Agreement or the negotiations related hereto without Buyer's prior written
consent. The violation of this provision, in whole or in part, shall in addition
to any other rights or remedies available to Buyer at law or in equity, which
specifically entitle Buyer to injunctive relief to enforce this provision.
Representations with Respect to BUYER'S Shares.
With respect to the Buyer's Shares, each Shareholder, individually,
represents and warrants as follows:
(a) Restriction on Shares.
The Shareholder recognizes the Buyer's Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), or the
securities or "blue sky" laws of any state, and that such Buyer's
Shares are therefore "restricted" and may not be transferred except
pursuant to a valid registration under the Act, or in a transaction
24
exempt from registration. The Shareholder acknowledges that the
certificates representing the Buyer's Shares will bear a legend
substantially as follows:
SECURITIES LEGEND
The shares represented by this certificate have not been
registered with the State of California or the Securities &
Exchange Commission. The shares may not be offered or sold without
causing the same to be registered for sale with appropriate
regulatory agencies, state and federal, or without a written
opinion from counsel to the company that such sale can be made
without such registration. The shares of stock represented by this
certificate have been acquired for investment and not with a view
toward distribution and have not been registered pursuant to the
Securities Act of 1933, as amended. These shares may not be sold
or transferred in the absence of such registration or without a
written opinion of counsel for the Company stating that such
registration is not necessary.
The Shareholder recognizes that counsel for Buyer may require an
opinion of counsel for the Shareholder or the Shareholder's intended transferee,
prior to effecting such transfer, to the effect that such transfer may be made
without registration under the Act. Any such opinion would be at the
Shareholder's expense or Shareholder's intended transferee's expense.
(b) Accredited Investor.
Each Shareholder acknowledges that such Shareholder is an "accredited
investor", as that term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission, or otherwise
financially able to bear the economic risk of loss of the investment,
by reason of such Shareholder's income or net worth as set forth in the
investment letter attached hereto as Section 3.01 Schedule (n), and
that such Shareholder has substantial experience in making investment
decisions of this type.
The Shareholder has employed competent counsel and executes this
Agreement in reliance upon the advice of counsel that the sale and
transfer of the Buyer's Shares to such Shareholder is consistent with
the aforementioned securities laws. In addition, such Shareholder's
counsel has explained to such Shareholder the restrictions upon any
transfer of the Buyer's Shares herein purchased and accepted.
In acquiring the Buyer's Shares, the Shareholder has not relied upon
any representation of Buyer or any officer, employee or agent thereof,
but has relied in its entirety upon such Shareholder own due diligence
investigation of Buyer.
The Shareholder understands and assumes the risks inherent in the
acquisition of shares of Buyer's stock and understands that the value
thereof may be adversely affected by general market conditions and
adverse corporate developments, including but not limited to inadequate
cash flow, interest rate fluctuation, availability of working and
expansion capital, the death or disability of key employees,
25
competition and various other financial and business factors, all of
which have been considered in the due diligence analysis and
investigation of Buyer's and the acceptance of such risks.
Registration Rights with Respect to the Buyer's Shares.
(a) Definitions.
As used in this Section 5.28, the following terms have the meanings
indicated.
(i) "Commission" means the Securities and Exchange Commission or any other
agency at the time administering the Securities Act.
(ii)
"Person" will be broadly construed to include any individual, entity,
corporation, partnership, joint venture, association, joint stock
company, trust, or unincorporated organization.
(iii) "Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and
the rules promulgated thereunder, and the declaration or ordering of
the effectiveness of such registration statement.
(iv) "Registrable Common Stock" means the Buyer's Shares acquired by
Shareholders pursuant to this Agreement and any securities issued in
respect of the Buyer's Shares.
(v) "Registrant" means Buyer or its successor by merger, consolidation,
share exchange, sale of all or substantially all of its assets, or
similar transaction.
(b) Registration Rights.
Within ninety (90) days from the Closing or within thirty (30) days
following the date that Buyer's auditors deliver to Buyer audited
financial statements of the Company, in form and substance in
compliance with the Securities Act of 1933 and the Securities Exchange
Act of 1934 with respect to the Registrable Shares, whichever occurs
earlier, the Buyer will, upon the request of the Shareholders and if
required, under applicable law for the Registrable Shares to be sold by
the Shareholders, file a registration statement under the Securities
Act in accordance with the following procedures:
(i) prepare and file with the Commission a registration statement with
respect to the Registrable Common Stock and use its reasonable best
efforts to cause such registration statement to become effective and
promptly notify Shareholders: (i) when such registration statement
becomes effective; (ii) when a post-effective amendment to such
registration statement becomes effective; and (iii) of any request by
the Commission for any amendment or supplement to such registration
statement or any prospectus relating thereto or for additional
information;
26
(ii) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by
such registration statement for a period of not less than 90 days after
the effective date of such registration statement to the extent
necessary to permit the completion of the sale or distribution of the
Registrable Common Stock within such period, provided, that if the
Registrant takes any action with respect to the acquisition of the
stock or assets of any business entity that would require the
Registrant to amend any prospectus included in a registration statement
by including financial statements that conform to the requirements of
Regulation S-X promulgated by the Commission, Shareholders will suspend
the offering or sale of the Registrable Common Stock for a period not
to exceed 45 days so that the Registrant may prepare such financial
statements (which the Registrant will prepare as promptly as possible)
and the 90-day period referred to above in this Section will be
extended for a period equivalent to such delay;
(iii) furnish to Shareholders, prior to filing a registration statement,
copies of such registration statement as proposed to be filed and
thereafter, such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus), and
such other documents as Shareholders may reasonably request in order to
facilitate the disposition of the Registrable Common Stock being
offered by Shareholders;
(iv) use its reasonable best efforts to cause the Registrable Common Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of Registrant to
enable Shareholders to consummate the disposition of such Registrable
Common Stock;
(v) during the period when the registration statement is required to be
effective, notify Shareholders of the happening of any event as a
result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and Registrant will prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Common Stock, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vi) in the event that such sale is pursuant to an underwritten offering,
enter into an underwriting agreement containing customary terms; and
(vii) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission.
27
(c) Shareholders Cooperation.
In connection with each registration effected pursuant to this Article,
Shareholders agree:
(i) to timely furnish the Registrant with such information regarding
Shareholders and the proposed sale and distribution of the Registrable
Stock as the Registrant may reasonably request;
(ii) to execute and perform their obligations under any underwriting
agreement with customary terms and conditions acceptable to
Shareholders entered into by the Purchaser in connection with the
registered offering; and
(iii) during any period during which the Registrant is required to prepare an
amendment or supplement to any registration statement or prospectus, to
suspend offers and sales pursuant thereto until such amendment or
supplement becomes effective.
(d) Expenses.
The Registrant will bear all expenses of any registration effected
pursuant to this Section, except that Shareholders will pay (a)
underwriting discounts and commissions with respect to any shares sold
by Shareholders, (b) fees and expenses of Shareholders' counsel and (c)
blue sky filing and legal fees related to states in which registration
or qualification is undertaken solely as a result of Shareholders'
request.
(e) Indemnification and Contribution.
(i) In the case of any offering registered pursuant to this Article, the
Registrant agrees to indemnify and hold Shareholders, each underwriter
of Registrable Common Stock under such registration and each Person who
controls any of the foregoing within the meaning of Section 15 of the
Securities Act, harmless against any and all losses, claims, damages or
liabilities to which they or any of them may become subject under the
Securities Act or any other statute or common law or otherwise, and to
reimburse them, promptly upon request, for any legal or other expenses
reasonably incurred by them in connection with investigating any claims
and defending any actions, insofar as any such losses, claims, damages,
liabilities or actions shall arise out of or shall be based upon (a)
any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of such
Registrable Common Stock, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading or (b) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
prospectus (as amended or supplemented if the Registrant shall have
28
filed with the Commission any amendment thereof or supplement thereto),
if used prior to the effective date of such registration statement, or
contained in the prospectus (as amended or supplemented if the
Registrant shall have filed with the Commission any amendment thereof
or supplement thereto), or the omission or alleged omission to state
therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the indemnification agreement
contained in this Section shall not apply to such losses, claims,
damages, liabilities or actions that shall arise from the sale of
Registrable Common Stock if such losses, claims, damages, liabilities
or actions shall arise out of or shall be based upon any such untrue
statement, or any such omission or alleged omission, if such statement
or omission shall have been made in reliance upon and in conformity
with information furnished in writing to the Registrant by Shareholders
or any such underwriter specifically for use in connection with the
preparation of the registration statement or any preliminary prospectus
or prospectus contained in the registration statement or any such
amendment thereof or supplement thereto.
(ii) In the case of each offering registered pursuant to this Article,
Shareholders and each underwriter participating therein shall agree in
the same manner and to the same extent as set forth in Section 5.28 (e)
(1) hereof severally to indemnify and hold harmless the Registrant, and
each person, if any, who controls the Registrant within the meaning of
Section 15 of the Securities Act, and the directors and officers of the
Registrant with respect to any statement in or omission from such
registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid), if such
statement or omission shall have been made in reliance upon and in
conformity with information furnished in writing to the Registrant by
Shareholders or such underwriter, respectively, specifically for use in
connection with the preparation of such registration statement or any
preliminary prospectus or prospectus contained in such registration
statement or any such amendment or supplement.
(iii) Each party indemnified under this Section hereof shall, promptly after
receipt of notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party to so notify an
indemnifying party of any such action shall not relieve the
indemnifying party from any liability in respect of such action which
it may have to such indemnified party on account of the indemnity
agreement contained in this Section, unless and to the extent the
indemnifying party was prejudiced by such omission, and in no event
shall relieve the indemnifying party from any other liability which it
may have to such indemnified party. In case any such action shall be
brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may
desire, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, and the indemnifying party shall not be
liable to such indemnified party under this Section for any legal or
29
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation (unless such indemnified party reasonably objects to such
assumption on the grounds that there may be defenses to it which are
different from or in addition to such indemnifying party, in which
event the indemnified party shall be reimbursed by the indemnifying
party for the expenses incurred in connection with retaining separate
legal counsel).
(iv) If the indemnification provided for in this Section is unavailable to
an indemnified party in respect of any losses, claims, damages or
liabilities referred to herein, then each indemnifying party under any
paragraph of this Section, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the
relative fault of such indemnified party on the one hand and the
indemnifying parties on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
The relative fault of such indemnified party and the indemnifying
parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied
by such parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. The amount
paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to above shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating, defending or settling any such action or claim.
(f) Certain Limitations on Registration Rights.
Notwithstanding the other provisions of Section 5.28, the Registrant
shall not be obligated to register shares of Shareholders if, in the
opinion of counsel to the Registrant reasonably satisfactory to
Shareholders and its counsel, the sale or other disposition of
Shareholders' shares, in the manner proposed by Shareholders, may be
effected without registering such shares under the Securities Act.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Shareholders that:
30
Funds.n 6.01
The Buyer has and, immediately prior to the Closing, will have the
funds and will have the number of authorized Buyer's Shares necessary to
consummate the purchase of the Shares hereunder.
The Buyer.02
The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and has the full corporate
power and authority to own, lease and operate its properties and carry on its
business in all respects as presently owned or conducted. The Buyer is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where it is required to do so. Attached hereto as
Section 6.02 Schedule (a)o are: (i) a copy of a certificate of good standing
from the Secretary of State of the State of California evidencing the due
organization, valid existence and good standing of the Company in the State of
California; and, (ii) if applicable, a certificate from the Secretary of State
of each foreign jurisdiction where the Company is qualified to transact business
evidencing the due organization, valid existence and good standing of the
Company in such foreign jurisdiction.
Brokers.6.03
Except for Financial Capital Resources, Inc. which shall be the sole
responsibility of Buyer, no broker, finder or investment banker is entitled to
any brokerage, finders or other fee or commission in connection with the
transactions hereunder based upon arrangements made by or on behalf of the
Buyer.
Authorization.
The execution and delivery by the Buyer of this Agreement and each
document to which Buyer is a party and the performance by Buyer of its
obligations hereunder are with respect to Buyer: (i) within its corporate
powers; (ii) not in violation of any provision of its charter or by-laws; (iii)
do not violate any provision of law applicable to Buyer or to any agreement to
which it is a party; and (iv) do not result in the creation of or imposition of
any Lien on any asset of any Buyer. The Buyer has taken all necessary corporate
action to authorize the issuance of the Buyer's Shares to the Shareholders.
Copies of the minutes of the Board of Directors of Buyer are attached hereto as
Section 6.04 Schedule (a)o.
Binding Effect.
The execution and delivery of this Agreement and each document required
hereunder constitutes a legal and binding obligation of Buyer, enforceable in
accordance with its terms.
Buyer's Shares.
The Buyer's Shares to be delivered at Closing shall be delivered free
and clear of all liens, claims, charges or other encumbrances of any nature
whatsoever.
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ARTICLE VII.
ADDITIONAL AGREEMENTS
Conduct of Business by the Company Pending the Closing.
Except as contemplated by this Agreement, the Shareholders covenant and
agree that, during the period between the date of this Agreement and through and
including the Closing Date, unless the Buyer shall otherwise agree in writing,
the business of the Company shall be conducted only in, and the Shareholders,
and the Company shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice. In furtherance of the
foregoing and not by way of limitation, the Shareholders further agree to use
their best efforts so that:
(a) Preserve Business.
The Company uses its best efforts to preserve the business of the
Company; to keep available for Buyer the services of the present
employees and agents of the Company in the event that Buyer elects at
the Closing to retain the services of any or all of such employees, and
to preserve for Buyer the good will of suppliers, customers and others
having business relations with it; the Company will use its best
efforts to serve its respective customers in an efficient manner and to
retain its customers;
(b) Maintain Insurance.
The Company will maintain in full force and effect all policies of
insurance now in effect, or renewals thereof, and will give all notices
and present all claims under all policies of insurance in due and
timely fashion;
(c) Notice of Suits and Other Proceedings.
Buyer shall be promptly advised of the commencement of any suit,
action, proceeding or investigation affecting the Company and any of
its assets (whether or not covered by insurance) or any tax audit or
assessment or proposed audit or assessment with respect to such
corporation;
(d) Accounting Practices.
No change will be made in the accounting procedures, practices or
methods applicable to or used by the Company.
(e) Acquire Consents and Waivers.
The Shareholders will obtain, at their own expense, all waivers,
consents and modifications of the nature referred to in Section 5.08.
(f) Delivery of Supplemental Information.
The Shareholders will deliver to Buyer, at the Closing, supplemental
information updating the information set forth in each Schedule hereto,
so that such Schedules as supplemented by such information, will be
true and correct as if the representations and warranties contained
therein made as of the date of this Agreement were made, in addition,
as of the Closing Date.
32
(g) Certificate of Incorporation and By-Laws.
No change will be made in the Certificate of Incorporation or By-Laws
of the Company.
(h) Capital Structure.
No change will be made in the authorized or issued stock of the Company
nor shall any rights, warrants, options or commitments relating
thereto, be granted, issued or exercised; no change will be made in the
beneficial or record ownership of the stock or in the outstanding stock
of the Company; nor shall any agreement be entered into in respect of
the stock or any outstanding stock of the Company or for the grant of
any options, warrants, rights, commitments or security interests
relating to the stock or such outstanding stock of the Company.
(i) Dividends and Redemption.
Except as set forth in the Preliminary Closing Balance Sheet, no
dividend or other distribution or payment will be declared or paid on
or in respect of the Shares, or any outstanding stock of the Company,
nor will any of the Shares, or any outstanding stock, of the Company be
directly or indirectly redeemed, retired, purchased or otherwise
acquired.
(j) Changes in Compensation.
No increase will be made in the compensation or rate of compensation or
commission payable or to become payable by the Company to its
directors, officers or employees earning Twenty Thousand Dollars
($20,000.00) or more per annum; nor will any employee be hired at a
salary in excess of Twenty Thousand Dollars ($20,000.00) per annum. No
contract will be entered into to hire or to continue the employment of
any employee; no collective bargaining or union agreement will be
entered into or be amended, modified or changed in any respect; nor
shall any bonus, profit sharing or other extraordinary compensation be
paid by the Company or any employee benefit plan, agreement or
arrangement be adopted or entered into or be amended, modified or
changed in any respect.
(k) Filing of Tax Returns and Tax Reports.
The Company will duly and timely file all reports or returns required
to be filed with federal, state, local and other authorities and will
promptly pay all federal, state and local taxes, assessments and
governmental charges levied or assessed upon the Company or any of its
properties or upon any part thereof (other than any being contested in
good faith for which adequate reserves are created); and will duly
observe and conform to all lawful requirements of any governmental
authority and to all terms and conditions upon or under which any
properties are held or operated by it. Any change in the accounting
methods, elections or filing status or other material matters related
to the filing of any tax returns shall be approved by Buyer, in writing
prior to the filing of such return.
33
Access to Information.
(a) Access.
From the date hereof to the Closing Date, the Shareholders shall, and
shall cause the Company, and its officers, directors, employees,
auditors and other agents to, afford the Buyer and its auditors,
employees, and other agents reasonable access, at all reasonable times,
to the officers, employees, agents, properties, offices, and other
facilities of the Company and to all books and records, and shall
furnish the Buyer with all financial, operating and other data and
information with respect to the business and properties of the Company
as the Buyer, through its employees or agents, may reasonably request.
No investigation pursuant to this Section 7.02 shall affect any
representations or warranties of the parties herein or the conditions
to the obligations of the parties hereto.
(b) Confidentiality.
All information furnished by the Shareholders and the Company hereunder
shall be treated as the property of the Shareholders until consummation
of the transactions hereby, and, if such transactions shall not occur
and the Shareholders and the Company are not in default hereunder,
Buyer shall return to the Shareholders all documents or other materials
containing information of supplied hereunder and shall keep such
information confidential and shall not use such information for any
competitive purpose.
Notification of Certain Matters.
The Shareholders shall give prompt notice to the Buyer of: (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate; and (ii) any failure of the
Shareholders to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied hereunder.
Further Action; Reasonable Efforts.
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all appropriate action, and to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereunder.
ARTICLE VIII.
INDEMNIFICATION
Indemnification by the Shareholders.
The Shareholders jointly and severally covenant and agree that,
notwithstanding the Closing, the delivery of any instruments of conveyance, and
any liquidation or dissolution of the Company, and regardless of any
investigation at any time made by or on behalf of Buyer or of any information
Buyer may have in respect thereof, the Shareholders, jointly and severally will
indemnify, hold harmless and defend, from, for and against any loss, damage,
liability, deficiency or claim (including without limitation, reasonable
34
attorneys' fees and other costs and expenses incident to any suit, action,
investigation or other proceeding) arising out of or resulting from, and will
pay Buyer, the Company, and its affiliates on demand, the full amount of any sum
which the Buyer, the Company, and their affiliates may pay or become obligated
to pay on account of (i) any inaccuracy in any representation or the breach of
any warranty made by any Shareholders or the Company hereunder; (ii) any failure
of any Shareholders or the Company duly to perform or observe any term,
provision, covenant, agreement or condition hereunder on the part of the
Shareholders or the Company to be performed or observed; (iii) any debt,
expense, claim, litigation or other action of any nature arising out of any act
performed, or transactions entered into by the Shareholders or the Company prior
to the Closing and asserted against the Buyer or the Company, including, but not
limited to the claims against the Company set forth on Section 5.22 Schedule
(a); (iv) any income, payroll, franchise and excise tax or other tax liability
of the Company or the Shareholders for periods prior to the Closing unless such
tax liabilities are specifically reserved for in the Closing Balance Sheet (iv)
any loss, deficiency, debt, expense, claim, litigation, or other action of any
nature arising out of or resulting from the inclusion in the Closing Balance
Sheet or the existence on the date of Closing of a Defective Loan. In addition
to its other remedies hereunder, Buyer shall have the right to set-off any claim
arising hereunder against any amounts due the Shareholders by the Company or the
Buyer at or subsequent to Closing. Each such Damage Claim is referred to herein
as a "Buyer's Indemnified Loss".
Indemnification by the Buyer.
The Buyer covenants and agrees that, notwithstanding the Closing, the
delivery of any instruments of conveyance, and any liquidation or dissolution of
the Company, and regardless of any investigation at any time made by or on
behalf of the Shareholders or of any information Shareholders may have in
respect of the Buyer, the Buyer will indemnify, hold harmless and defend, from,
for and against any loss, damage, liability, deficiency or claim (including
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any suit, action, investigation or other proceeding) arising out of
or resulting from, and will pay the Shareholders, on demand, the full amount of
any sum which the Shareholders may pay or become obligated to pay on account of
(i) any inaccuracy in any representation or the breach of any warranty made by
the Buyer; (ii) any failure of the Buyer duly to perform or observe any term,
provision, covenant, agreement or condition hereunder on the part of the Buyer
to be performed or observed; (iii) any debt, expense, claim, litigation or other
action of any nature arising out of any act performed, or transactions entered
into by the Buyer subsequent to the Closing and asserted against the
Shareholders, in their capacities as former Shareholders of the Company. In
addition, the Shareholders shall have the right of set-off any claim arising
hereunder against any amounts due from the Shareholders to the Company or the
Buyer at or subsequent to Closing. Each such Damage Claim is referred to herein
as a "Shareholders Indemnified Loss".
Conditions of Indemnification.
All claims for indemnification under this Agreement shall be asserted
and resolved as follows:
(a) Notification of Claim, Election Period.
A party claiming indemnification under this Agreement (an "Indemnified
Party") shall promptly (i) notify the party from whom indemnification
is sought (the "Indemnifying Party") of any third-party claim or claims
35
asserted against the Indemnified Party ("Third Party Claim ) that could
give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnified Party a written notice ("Claim Notice")
describing in reasonable detail the nature of the Third Party Claim, a
copy of all papers served with respect to that claim (if any), an
estimate of the amount of damages attributable to the Third Party Claim
to the extent feasible (which estimate shall not be conclusive of the
final amount of that claim) and the basis for the Indemnified Party's
request for indemnification under this Agreement. Except as set forth
in Section 8.01, the failure to promptly deliver a Claim Notice shall
not relieve the Indemnifying Party of its obligations to the
Indemnified Party with respect to the related Third Party Claim except
to the extent that the resulting delay is materially prejudicial to the
defense of that claim. Within 15 days after receipt of any Claim Notice
(the "Election Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Section 8.01
with respect to that Third Party Claim, and (ii) if the Indemnifying
Party does not dispute its potential liability to the Indemnified Party
with respect to that Third Party Claim, whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against that Third Party Claim.
(b) Defense of Third Party Claims by Indemnifying Party.
If the Indemnifying Party does not dispute its potential liability to
the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the
defense of the Third Party Claim, then the Indemnifying Party shall
have the right to defend, at its sole cost and expense, that Third
Party Claim by all appropriate proceedings which proceedings shall be
prosecuted diligently by the Indemnifying Party to a final conclusion
or settled at the discretion of the Indemnifying Party in accordance
with this Section 8.03(b), and the Indemnified Party will furnish the
Indemnifying Party with all information in its possession with respect
to that Third Party Claim and otherwise cooperate with the Indemnifying
Party in the defense of that Third Party Claim; provided, however, that
the Indemnifying Party shall not enter into any settlement with respect
to any Third Party Claim that purports to limit the activities of or
otherwise restrict in any way, any Indemnified Party or any affiliate
of any Indemnified Party without the prior consent of that Indemnified
Party (which consent may be withheld in the sole discretion of that
Indemnified Party). The Indemnified Party is hereby authorized at the
sole cost and expense of the Indemnifying Party, to file, during the
Election Period any motion, answer or other pleadings that the
Indemnified Party shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this
Section 8.03(b) and will bear its own costs and expenses with respect
to that participation; provided, however, that if the named parties to
any such action (including any impleaded parties) include both the
36
Indemnifying Party and the Indemnified Party, and the Indemnified Party
has been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the Indemnifying Party, then the Indemnified Party
may employ separate counsel at its own expense (which expense may be
included in the claim for indemnification) and, on its written
notification of that employment, the Indemnifying Party shall not have
the right to assume or continue the defense of such action on behalf of
the Indemnified Party.
(c) Disputed Liability, Defense of Third Party Claims.
If the Indemnifying Party (i) within the Election Period (a) disputes
its potential liability to the Indemnified Party under this Article
VIII, (b) elects not to defend the Indemnified Party pursuant to
Section 8.03(c) or (c) fails to notify the Indemnified Party that the
Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 8.03(c) or (ii) elects to defend the Indemnified Party pursuant
to Section 8.03(c), but fails diligently and promptly to prosecute or
settle the Third Party Claim, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the Indemnifying Party
(if the Indemnified Party is entitled to indemnification hereunder),
the Third Party Claim by all appropriate proceedings, which proceedings
shall be promptly and vigorously prosecuted by the Indemnified Party to
a final conclusion or settled. The Indemnified Party shall have full
control of such defense and proceedings. Notwithstanding the foregoing,
if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article
VIII and if that dispute is resolved in favor of the Indemnifying
Party, the Indemnifying Party shall not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to this
Section 8.03, or of the Indemnifying Party's participation therein at
the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable costs and
expenses of such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the
Indemnified Party pursuant this Section 8.03(c) and the Indemnifying
Party shall bear its own costs and expenses with respect to that
participation.
(d) Direct Claims.
In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim,
the Indemnified Party shall transmit to the Indemnifying Party a
written notice (the "Indemnity Notice") describing in reasonable detail
the nature of the claim, an estimate of the amount of Damages
attributable to that claim to the extent feasible (which estimate shall
not be nonexclusive of the final amount of that claim) and the basis of
the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 15 days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes the claim specified by the Indemnified
Party in the Indemnity Notice that claim shall be deemed a liability of
the Indemnifying Party hereunder. If the Indemnifying Party has timely
37
disputed that claim as provided above, that dispute shall be resolved
in accordance with the mediation and arbitration procedure set forth
below.
(e) Claims and Disputes.
Claims, disputes or other matters arising out of or relating to this
Agreement or breach thereof shall be subject to and decided by
mediation or arbitration. Such mediation or arbitration shall be
conducted in accordance with the Arbitration Rules of the American
Arbitration Association currently in effect.
(i) Mediation. In addition to and prior to arbitration, the parties shall
endeavor to settle disputes by mediation. Demand for mediation shall be
filed in writing with the other party to this Agreement and with the
American Arbitration Association office located in California, which
shall be the site of any such proceeding. A demand for mediation shall
be made within a reasonable time after the claim dispute or other
matter in question has arisen or as specified in accordance with the
proceeding sections of this Article, as applicable. In no event shall
the demand for mediation be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other
matter in question would be barred by the applicable statutes of repose
or limitations.
(ii) Arbitration. Demand for arbitration shall be filed in writing with the
other party to this Agreement and with the American Arbitration
Association office located in the state of California, which shall be
the site for any such arbitration. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or other matter
in question has arisen or as specified in accordance with the
proceeding sections of this Article, as applicable. In no event shall
the demand for arbitration be made after the date when institution of
legal or equitable proceedings based on such claim, dispute or other
matter in question would be barred by the applicable statutes of repose
or limitations.
(iii) Joinder and Finality. No other arbitration arising out of or relating
to this Agreement shall include, by consolidation, joinder or in any
other manner, an additional person or entity not a party to this
Agreement, except by written consent containing a specific reference to
this Agreement signed by the other party hereto and any other person or
entities sought to be joined. Consent to arbitration involving an
additional person or entity shall not constitute consent to arbitration
of any claim, dispute or other matter in question not described in the
written consent or with a person or entity not named or described
therein. The foregoing agreement to arbitrate and other agreements to
arbitrate with an additional person or entity duly consented to by the
parties to this Agreement shall be specifically enforceable in
accordance with applicable law in any court having jurisdiction
thereof. The award rendered by the arbitrator or arbitrators shall be
final, and judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof.
38
(f) Payments Of Indemnified Amounts.
Payments of all amounts owing by an Indemnifying Party pursuant to this
Article VIII relating to a Third Party Claim shall be made within 30
days after the latest of (i) the settlement of that Third Party Claim;
(ii) the expiration of the period for appeal of a final adjudication of
that Third Party Claim; or, (iii) the award by an arbitrator in
accordance with this Section. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 8.03(d) shall be made within 30
days after the later of (i) the expiration of the 30-day Indemnity
Notice period; or, (ii) the award by an arbitrator in accordance with
this Section.
(g) Limitations on Indemnification.
Limitations on Indemnification.
(a) Limitations on the Shareholders' Indemnification Obligations.
Notwithstanding the provisions of this Article VIII, the Shareholders
shall not be required to indemnify or hold harmless Buyer on account of
any Buyer Indemnified Loss under Section 8.01, unless the liability of
the Shareholders in respect of that Buyer Indemnified Loss, when
aggregated with the liability of the Shareholders in respect of all
Buyer Indemnified Losses under Section 8.01 exceeds $25,000.00. In no
event shall the aggregate joint and several liability of the
Shareholders under Section 8.01 exceed $2,000,000.00.
(b) The Shareholders' Indemnification Obligations for Existing Litigation
and Claims. The Shareholders' indemnification or reimbursement
liability to Buyer for claims made under Section 8.01 with respect to
matters set forth on Section 5.22 Schedule (a) shall not be subject to
the limitations described in Section 8.04(a).
(c) Limitations on Buyer's Indemnification Obligations.
Notwithstanding the provisions of Section 8.02, Buyer shall not be
required to indemnify or hold harmless the Shareholders on account of
any Shareholders' Indemnified Loss under Section 8.02, unless the
liability of Buyer in respect of that Sellers' Indemnified Loss, when
aggregated with the liability of the Shareholders in respect of all
Buyer's Indemnified Losses under Section 8.02 exceeds $25,000.00. In no
event shall the liability of Buyer Section 8.02, exceed $2,000,000.00.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
Termination.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date, provided any one
of the following occurs:
(i) By mutual written consent of the Shareholders and the Buyer; or
39
(ii) By the Buyer or the Shareholders, if any court of competent
jurisdiction, governmental authority shall have issued an order, decree, or
ruling or taken any other action restraining, enjoining or otherwise prohibiting
any of the transactions hereunder and such order, decree, ruling or other action
shall have become final and nonappealable; or
(iii) This Agreement shall terminate (without any action or notice (in
writing or otherwise) by any of the parties hereto) if any Bankruptcy Proceeding
shall have been instituted or consented to by or against the Company.
Effect of Termination.
In the event of the termination of this Agreement pursuant to Section
9.01, this Agreement shall forthwith become void and have no effect and there
shall be no liability on the part of any party hereto; provided, however, that
nothing herein shall relieve any party from liability for any breach hereof.
Section 9.03 Amendment.
This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 9.04 Waiver.
At any time prior to the Closing Date, either party hereto may: (a)
extend the time for the performance of any of the obligations or other acts of
the other party hereto; (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party to be bound thereby. The failure of either party to
assert any of its rights hereunder shall not constitute a waiver of any such
rights.
ARTICLE X.
GENERAL PROVISIONS
Section 10.01 Notices.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telecopy,
telegram or telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(i) if to the Buyer:
Transnational Financial Network
2nd Floor
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
40
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with an informational copy to:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Shareholders:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
______________, California __________
Phone: (____) __________________
Fax: (_____) ___________________
with an informational copy to:
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Berliner & ▇▇▇▇▇
Ten Almaden ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.02 Expenses of Litigation.
In the event any litigation or any similar proceeding (collectively,
"Litigation") is commenced or defended by any party hereto claiming, in such
Litigation or defense, a breach of this Agreement by any other party hereto, and
in the event such commencing or defending party is successful on the merits of
such claim or defense, and substantially prevails in the Litigation, the party
against whom such claim is made or such defense is asserted shall pay to the
claimant or defendant, as the case may be, all costs and expenses, including,
without limitation, court costs and attorneys' fees (whether at trial, upon
appeal, or during investigation), of such claimant or defendant in prosecuting
such claim or establishing such defense.
Section 10.03 Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
41
Section 10.04 Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California regardless of the law, that might otherwise
govern under applicable principles of conflicts of laws thereof.
Section 10.05 Survival.
All representations, warranties, indemnities and covenants made by the
parties in this Agreement, the Schedules and all other agreements executed as
part of this transaction shall (notwithstanding any instrument of conveyance,
transfer document and the dissolution or liquidation of the Company) survive the
Closing for a periods as follows: (a) all representations, warranties,
indemnities and covenants with respect to tax obligations of the Company shall
survive for a period equal to the respective statute of limitations applicable
to such taxes; (b) all representations, warranties, indemnities and covenants
with respect to Mortgage Loans, and all other representations, warranties,
indemnities and covenants shall survive for a period of three (3) years after
the Closing Date. Upon the expiration date applicable to a representation,
warranty and covenant, such representation, warranty indemnity and covenant
shall terminate and expire, and no longer be actionable, unless, on or before
such date, the party seeking enforcement has delivered to the other party a
written claim with respect to such representation, warranty, indemnity or
covenant, in which event the obligations of the parties shall remain open only
as to such claim for which notice was delivered prior to the expiration date
provided for herein, and no new claims may be presented after the expiration of
the period provided for herein.
Section 10.06 Headings.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.07 Counterparts.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
Section 10.08 Specific Performance.
The parties hereto agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not to be performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity.
Section 10.09 Expenses.
Each party shall pay all of their own respective expenses incurred by
or on behalf of each of them in connection with this Agreement and the
transactions contemplated hereunder, including, but not limited to all
attorneys' fees.
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Section 10.10 Entire Agreement, Assignment.
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, between the parties. This Agreement
shall not be assigned by operation of law or otherwise, except that the Buyer
may assign all or any of its rights and obligations hereunder to an affiliate of
Buyer or wholly-owned subsidiary thereof upon the execution of a written
instrument whereby such assignee agrees to assume all of the Buyer's obligations
hereunder, but such assignment shall not relieve Buyer of its obligations
hereunder.
Section 10.11 Time.
Time is of the essence in the performance of this Agreement.
Section 10.12 Reformation and Severability.
If any provision of this Agreement is invalid, illegal or unenforceable
that provision shall, to the extent possible, be modified in such manner as to
be valid, legal and enforceable so as to most nearly retain the intent of the
parties hereto as expressed herein and if such a modification is not possible,
that provision shall be severed from this Agreement and in either case the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in anyway be affected or impaired thereby.
Section 10.13 Preparation and Filing of Tax Returns.
At the Buyer's option, the Shareholders shall execute and deliver all
forms and consents required to treat the purchase of the Shares as a Section 338
Election for tax purposes. Each party hereto will provide to each of the other
parties hereto such cooperation and information as each of them reasonably may
request in filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any audit or
other proceeding in respect of Taxes. This cooperation and information shall
include providing copies of all relevant portions of the relevant Returns,
together with such accompanying schedules and work papers documents relating to
rulings or other determinations by Taxing Authorities and records concerning the
ownership and Tax bases of property as are relevant and which a party possesses.
Each party will make its employees, if any, reasonably available on a mutually
convenient basis at its cost to provide an explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs attributable to
the preparation and filing of those Returns.
Section 10.14 News Releases.
No notices to third parties or other publicity, including press
releases, concerning any of the transactions provided for herein shall be made
unless planned and coordinated jointly between Buyer and the Shareholders.
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IN WITNESS WHEREOF, the Buyer and the Shareholders have each caused
this Agreement to be executed as of the date first written above.
Buyer:
TRANSNATIONAL FINANCIAL NETWORK, INC.
By:_____________________________
Shareholders:
--------------------------------
▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇. ▇▇▇▇▇▇▇▇
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EXHIBIT A
DEFINITIONS
Adverse Effect means any circumstance, change, event, transaction, loss,
failure, effect or other occurrence that is, or is reasonably likely to be,
materially adverse to the business, operations, properties (including intangible
properties), condition (financial or otherwise), asset, liabilities, results of
operations or prospects of the Company taken as a whole.
Affiliate of a Person means a Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person.
Agreement shall mean this Stock Purchase Agreement.
Appraisal means, for any Mortgage Loan, a written statement of the market value
of the real property securing it.
Appraisal Law means any Law that is applicable to appraisals of
mortgaged-residential property in connection with the transactions involving
that property.
Business Day means any day other than a Saturday, Sunday or federal holiday and
consists of the time period from 12:01 a.m. through 12:00 midnight, Central
Standard Time.
CERCLA has the meaning specified in the definition of Environmental Laws.
CERCLIS means the Comprehensive Environmental Responsive, Compensation and
Liability Information System, 42 U.S.C. 9616(a).
Claim Notice has the meaning specified in Section 8.03.
Closing means the completion of the transactions specified herein.
Closing Date means the date specified in Section 3.03.
Closing Financial Statements has the meaning specified in Article IV.
Code means the Internal Revenue Code of 1986, as amended, together with the
rules and regulations promulgated thereunder.
Control (including the terms controlled by and under common control with) means
the possession, directly or indirectly or as trustee or executor, of the power
to direct or cause the direction of the management and/or policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise.
Conventional Loan means a Mortgage Loan that is eligible for sale as a FNMA or
FHLMC Loan and complies with all applicable requirements for purchase under the
selling guides.
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Customer shall mean and include the account debtor with respect to any of the
Receivables and/or the prospective purchaser with respect to any contract right
and/or any party who enters into or proposes to enter into any contract or other
arrangement with the Company pursuant to which the Company is to deliver any
property for sale or mortgage loans, usually in the Company's ordinary course of
business.
Debt means, as to the Company or any other applicable person, at any date,
without duplication (i) all obligations of such person for borrowed money, (ii)
all obligations of such person evidenced by bonds, debentures or other similar
instruments, (iii) all obligations of such person to pay the deferred purchase
price of property or services, (iv) all obligations of such person as lessee
under capitalized lease obligations, (v) all obligations of such person to
purchase securities or other property which arise out of or in connection with
the sale of the same or substantially similar securities or property, (vi) all
non-contingent liabilities of such person to reimburse any bank or other person
in respect of amounts paid under a letter of credit or similar instrument, (vii)
all Debt of others secured by a lien on any assets of such person, whether or
not such debt is assumed by such person, and (viii) all Debt of others
guaranteed by such person. Debt shall include, without limitation, all
Indebtedness.
Debtor Laws shall mean all applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization or similar
laws or general equitable principles from time to time in effect affecting the
rights of creditors generally.
Defective Loan shall mean a Warehouse Loan which is not eligible for sale to a
Takeout Investor, or is one or more payments past due, or which is subject to
foreclosure, bankruptcy proceedings or other litigation proceedings as of the
Closing Date.
Encumbrance means any security interest, pledge, mortgage, lien (including
environmental liens), charge, adverse claim or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
Environmental Laws means any federal, state or local statute, code, ordinance,
rule, regulation, permit, consent, approval, license, judgment, order, writ,
judicial decision, decree, agency interpretation, injunction or other
authorization or requirement whenever promulgated, issued, or modified, relating
to:
(i) emissions, discharges, spills, releases or threatened releases of
pollutants, contaminants, Hazardous Substances, materials containing
Hazardous Substances, or hazardous or toxic materials or wastes into
ambient air, surface water, groundwater, watercourses, publicly or
privately owned treatment works, drains, sewer systems, wetlands,
septic systems or onto land;
(ii) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Substances, materials
containing Hazardous Substances or hazardous and/or toxic wastes,
material, products or byproducts (or of equipment or apparatus
46
containing Hazardous Substances) as defined in or regulated under the
following statutes and their implementing regulations: the Hazardous
Materials Transportation Act, 49 U.S C. 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601 et seq. (CERCLA), The Clean Water Act, 33 U.S.C. 1251 et
seq., The Clean Air Act, 42 U.S.C. 7401 et seq., and/or the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq., each as amended from
time to time; or, (c) otherwise relating to pollution or the protection
of human health or the environment.
ERISA means the Employee Retirement Income Security Act of 1974, as amended,
together with the rules and regulations promulgated thereunder.
FHA means the Federal Housing Administration within the United States Department
of Housing and Urban Development.
FHLMC means Federal Home Loan Mortgage Corporation.
FNMA means Federal National Mortgage Association.
GAAP means U.S. generally accepted accounting principles and practices in effect
from time to time applied consistently throughout the periods involved.
Hazardous Substances means (a) hazardous materials, hazardous wastes and
hazardous substances as defined or regulated under any Environmental Laws, (b)
any mixtures, blends, compounds or liquids containing any hazardous substances
in any proportions, petroleum and petroleum products including crude oil and any
fractions thereof, (d) asbestos and/or any material which contains any hydrated
mineral silicates, whether friable or non- friable, (e) PCBs, or PCB-containing
materials or fluids, (f) any other hazardous radioactive, toxic or noxious
substance, material, pollutant, or solid, liquid or gaseous waste, and (g) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring or remediation.
Indebtedness means with respect to any party to this Agreement, any amounts owed
by such party to third persons for any and all obligations.
Indemnified Party has the meaning specified in Section 8.03(a).
Intellectual Property has the meaning specified in Section 5.12.
Inventory shall mean and include all inventory of the Company as defined under
the Uniform Commercial Code of the State of California, as amended, and shall
include raw materials, work-in-progress, finished goods, and any combination
thereof, and all goods, merchandise or other property held by the Company for
sale or lease, and all related materials or supplies of every nature used,
consumed or to be used in the Company's business, and all packaging and shipping
materials, and all products and proceeds of any of the foregoing (including,
47
without limitation, proceeds consisting of accounts receivable, chattel paper
and insurance proceeds) whether now owned or hereafter acquired and wherever
located.
IRS means the United States Internal Revenue Service.
Jumbo Loan means a Mortgage Loan which exceeds the allowable maximum principal
amount permitted for a Conventional Loan but otherwise complies with all
applicable requirements for purchase by a Takeout Investor.
Laws means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions, and
interpretations of any Tribunal.
Leased Real Property means the real property leased by the Company, together
with, to the extent leased by the Company, all buildings and other structures,
facilities or improvements presently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
Liabilities means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, mature or unmatured or determined or
determinable, including, without limitation, those arising under any law, rule,
regulation, or order by a governmental authority and those arising under any
contract, agreement, commitment or undertaking.
Lien means any lien, mortgage, security interest, pledge, assignment, charge,
title retention agreement, or encumbrance of any kind and, any other arrangement
for a creditor's claim to be satisfied from assets or proceeds prior to the
claims of other creditors.
Litigation means any action by or before any Tribunal.
Marked to Market means valuing a Loan by determining the highest published
price, as of the close of business on the Closing Date, at which such Loan could
be sold.
Mortgage Loan means a loan that is evidenced by a valid promissory note, and is
secured by a mortgage, deed of trust, or trust deed that grants a perfected
first-priority Lien on the residential-real property.
Multi employer Plan means a Multi employer plan as defined in Section 3(37) or
4001 (a) (3) of ERISA or Section 414(f) of the IRC to which any ERISA affiliate
is making, or has made, or is accruing, or has accrued, an obligation to make
contributions.
Person means an individual, corporation, partnership, association, trust, joint
venture, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act).
Pipeline Application means a Mortgage Loan application signed by a borrower and
delivered to the Company prior to the applicable reporting date.
48
Pipeline Loans means a Pipeline Application that is accompanied by the agreement
of the borrower and the Company as to the interest rate, origination fee and the
discount points for the Mortgage Loan.
Purchaser means Buyer.
Qualified Originator means any Person that has net worth of at least $250,000
calculated in accordance with GAAP and has been originating Mortgage Loans for
at least three years and is solvent.
Real Property means the Leased Real Property and the Owned Real Property.
Receivables shall mean and include all accounts, contract rights, instruments,
documents, chattel paper and general intangibles, whether secured or unsecured,
now existing or hereafter created, of the Company, and whether or not
specifically sold or assigned to Lender.
Release shall mean releasing, placing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leeching, disposing or
dumping, whether intentional or unintentional.
Return has the meaning specified in Section 10.13.
Schedule or Schedules means the Schedules dated as of the date hereof delivered
to the Buyer by the Company and forming a part of this Agreement.
Securities Act means the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
Servicing shall mean the rights and obligations of the Company to collect fees
and payments and to apply payments in accordance with the Servicing Agreements
and the Mortgage Loans.
Servicing Agreements shall mean the agreements by and between the Company and
FNMA, FHLMC and Private Investors, as applicable, granting to the Company and
imposing on the Company certain rights and obligations to collect fees and apply
payments with respect to Mortgage Loans owned by FNMA, FHLMC and Private
Investors as applicable.
Buyer's Shares shall mean the authorized, issued and non-assessable shares of
common stock of Buyer delivered to the Shareholders hereunder or pursuant to
this Agreement.
Shares shall mean all of the issued and outstanding shares of stock of the
Company.
State shall mean the State of California.
Solvent means, for any Person, that (a) the fair-market value of its assets
exceeds its liabilities, (b) it has sufficient cash flow to enable it to pay its
debts as they mature, and (c) it does not have unreasonably small capital to
conduct its businesses.
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Takeout Commitment means a binding and enforceable commitment (and irrevocable
to the date indicated) from a Takeout Investor to purchase Mortgage Loans, in
favor of the Company (or from an Originator whose interest has been fully
assigned to the Company) with respect to which there is no condition which
cannot be reasonably anticipated to be satisfied or complied with before its
expiration. Each Takeout Commitment must be in writing and shall describe the
types of Mortgage Loans to be purchased, the purchase price, and the settlement
date (which shall not be more than sixty (60) days from the date of such Takeout
Commitment).
Takeout Investor means (a) FHLMC or FNMA or GNMA or (b) any other Person that
has a minimum stockholders equity of $5,000,000 calculated in accordance with
GAAP.
Tax or Taxes means all income, gross receipts, sales, use, transfer, employment,
withholding, franchise, profits, property, excise or other similar taxes,
estimated import duties, fees, stamp taxes and duties, value added taxes,
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto.
Taxing Authorities has the meaning specified in Section 10.13.
Third Party Claim has the meaning specified in Section 8.03(a).
Uniform Commercial Code means at any time the Uniform Commercial Code as in
effect in the state where a Loan Document has been filed, but shall mean as to
all Loan Documents in the interpretation of this Agreement, the Uniform
Commercial Code as in effect in the State of California.
Warehouse Lender means a bank or other financial institution that has extended
credit to the Company by a warehouse line of credit used by the Company to fund
Warehouse Loans.
Warehouse Loans means Mortgage Loans owned by the Company, funded by a Warehouse
Lender and held by the Company for delivery or sale to a Takeout Investor.
50
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o Section 3.01 Schedule (a) ▇▇▇▇▇▇▇ Employment Agreement
o Section 3.01 Schedule (b) ▇▇▇▇▇▇▇▇ Employment Agreement
o Section 3.01 Schedule (e) Opinion of Seller's Counsel
o Section 3.01 Schedule (n) Investment Letters
o Section 3.03 Schedule (a) Closing Statement
o Section 4.03 Schedule (a) Preliminary Closing Balance Sheet
o Section 5.01 Schedule (a) Articles of Incorporation
and By-Laws
o Section 5.01 Schedule (b) Certificates of Existence and
Foreign Qualification
o Section 5.02 Schedule (a) List of Stock Ownership
o Section 5.06 Schedule (b) List of Affiliates
o Section 5.07 Schedule (a) Company Debt to Shareholders
o Section 5.07 Schedule (b) Shareholders' Obligations
to the Company
o Section 5.07 Schedule (c) Powers of Attorney
o Section 5.08 Schedule (a) Defaults in Agreements
o Section 5.09 Schedule (a) Licenses and Permits
o Section 5.10 Schedule (a) Company Obligations
o Section 5.10 Schedule (b) Inventory of Owned Personal Property
o Section 5.10 Schedule (c) Inventory of Leased
Personal Property
o Section 5.11 Schedule (a) Accounts Receivable
o Section 5.12 Schedule (a) Tradenames and Intellectual Property
o Section 5.13 Schedule (a) Bank Accounts
o Section 5.14 Schedule (a) Takeout Investors
o Section 5.14 Schedule (b) Takeout Commitments
o Section 5.14 Schedule (c) Pipeline Applications
o Section 5.14 Schedule (d) Pipeline Loans
o Section 5.14 Schedule (e) Warehouse Loans
o Section 5.14 Schedule (f) Warehouse Lenders
o Section 5.14 Schedule (g) Repurchase Obligations
o Section 5.15 Schedule (a) Owned and Leased Real Property
o Section 5.17 Schedule (a) Financial Statements
o Section 5.19 Schedule (a) Employee Census
o Section 5.19 Schedule (b) Wages and Benefits
o Section 5.19 Schedule (c) Employee and Director Contracts
o Section 5.19 Schedule (d) Employee Benefit Plans
o Section 5.19 Schedule (a) Insurance Contracts
o Section 5.20 Schedule (b) Non-Competition Agreements
o Section 5.20 Schedule (c) Letters of Intent
o Section 5.20 Schedule (d) Equipment Leases
o Section 5.20 Schedule (e) Other Contracts
o Section 5.20 Schedule (f) Exceptions to Contracts
o Section 5.22 Schedule (a) Litigation and Judgments
o Section 5.23 Schedule (a) Exceptions to Operation in
Ordinary Course
2
o Section 5.24 Schedule (a) Broker Agreements
o Section 6.02 Schedule (a) Certificate of Existence of Buyer
o Section 6.04 Schedule (a) Authorizing Minutes of Buyer
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